printer-friendly

Sample Business Contracts

Agreement and Plan of Merger - Tel-Save Holdings Inc. and Shared Technologies Fairchild Inc.

Free Customizable Merger Forms

Sponsored Links

                          AGREEMENT AND PLAN OF MERGER


                            Dated as of July 16, 1997


                                      Among


                            TEL-SAVE HOLDINGS, INC.,


                                   TSHCo, INC.


                                       and


                       SHARED TECHNOLOGIES FAIRCHILD, INC.



<PAGE>



                                TABLE OF CONTENTS


                                                                          Page

                                    ARTICLE I

                                     MERGER

1.1.          The Merger...................................................1
1.2.          Filing.......................................................2
1.3.          Effective Time of the Merger.................................2

                                   ARTICLE II

                   CERTIFICATE OF INCORPORATION; BY-LAWS; ETC.

2.1.          Certificate of Incorporation and By-Laws of
                  Surviving Corporation....................................2
2.2.          Directors of Surviving Corporation...........................2
2.3.          Board of Directors of Acquiror...............................2
2.4.          Shareholders Agreement.......................................3

                                   ARTICLE III

                MERGER CONSIDERATION; CONVERSION OR CANCELLATION
                             OF SHARES IN THE MERGER

3.1.          Share Consideration; Conversion or Cancellation
                  of Shares in the Merger..................................3
3.2.          Payment for Shares in the Merger.............................8
3.3.          Fractional Shares...........................................11
3.4.          Transfer of Shares After the Effective Time.................12

                                   ARTICLE IV

                          CERTAIN EFFECTS OF THE MERGER

4.1.          Effect of the Merger........................................12
4.2.          Further Assurances..........................................13

                                    ARTICLE V

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

5.1.          Organization and Qualification..............................13
5.2.          Capital Stock of Subsidiaries...............................14
5.3.          Capitalization..............................................14


<PAGE>


                                                                           Page



5.4.          Authority Relative to This Agreement........................15
5.5.          No Violations, etc..........................................16
5.6.          Commission Filings; Financial Statements....................18
5.7.          Absence of Changes or Events................................18
5.8.          Joint Proxy Statement.......................................19
5.9.          Litigation..................................................19
5.10.         Title to and Condition of Properties........................20
5.11.         Contracts and Commitments...................................20
5.12.         Labor Matters...............................................20
5.13.         Compliance with Law.........................................21
5.14.         Board Recommendation........................................21
5.15.         Patents and Trademarks......................................21
5.16.         Taxes.......................................................21
5.17.         Employee Benefit Plans; ERISA...............................22
5.18.         Environmental Matters.......................................27
5.19.         Disclosure..................................................28
5.20.         Absence of Undisclosed Liabilities..........................28
5.21.         Finders or Brokers..........................................29
5.22.         State Antitakeover Statutes.................................29
5.23.         Opinion of Financial Advisor................................29
5.24.         Insurance...................................................29
5.25.         Employment and Labor Contracts..............................30
5.26.         Pending Transactions........................................30
5.27.         Indemnification Agreements..................................30
5.28.         Indemnified Liabilities.....................................31

                                   ARTICLE VI

                 REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND
                                   MERGER SUB

6.1.          Organization and Qualification..............................31
6.2.          Capital Stock of Subsidiaries...............................32
6.3.          Capitalization..............................................32
6.4.          Authority Relative to This Agreement........................32
6.5.          No Violations, etc..........................................33
6.6.          Commission Filings; Financial Statements....................35
6.7.          Absence of Changes or Events................................35
6.8.          Joint Proxy Statement.......................................35
6.9.          Board Recommendation........................................36
6.10.         Disclosure..................................................36
6.11.         Finders or Brokers..........................................36
6.12.         Opinion of Financial Advisor................................37



<PAGE>


                                                                           Page



                                   ARTICLE VII

                 CONDUCT OF BUSINESS OF ACQUIROR AND THE COMPANY
                               PENDING THE MERGER

7.1.          Conduct of Business of the Company Pending the
                  Merger..................................................37
7.2.          Conduct of Business of Acquiror Pending the
                  Merger..................................................40
7.3.          Permitted Conduct of the Company............................41

                                  ARTICLE VIII

                            COVENANTS AND AGREEMENTS

8.1.          Preparation of the Form S-4 and the Joint Proxy
                  Statement; Stockholders Meetings........................41
8.2.          Letters of the Company's Accountants........................43
8.3.          Letters of Acquiror's Accountants...........................44
8.4.          Additional Agreements; Cooperation..........................44
8.5.          Publicity...................................................45
8.6.          No Solicitation.............................................45
8.7.          Access to Information.......................................47
8.8.          Notification of Certain Matters.............................48
8.9.          Resignation of Directors....................................48
8.10.         Indemnification.............................................48
8.11.         Fees and Expenses...........................................50
8.12.         Affiliates..................................................50
8.13.         NASDAQ Listing..............................................50
8.14.         Stockholder Litigation......................................51
8.15.         Tax Treatment...............................................51
8.16.         Pooling of Interests........................................51
8.17.         Fairness Opinion............................................51

                                   ARTICLE IX

                              CONDITIONS TO CLOSING

9.1.          Conditions to Each Party's Obligation to Effect
                  the Merger..............................................52
9.2.          Conditions to Obligations of Acquiror.......................53
9.3.          Conditions to Obligations of the Company....................54



<PAGE>


                                                                           Page



                                    ARTICLE X

                                   TERMINATION

10.1.         Termination.................................................55
10.2.         Effect of Termination.......................................57

                                   ARTICLE XI

                                  MISCELLANEOUS

11.1.         Nonsurvival of Representations and Warranties...............57
11.2.         Closing and Waiver..........................................58
11.3.         Notices.....................................................58
11.4.         Counterparts................................................60
11.5.         Interpretation..............................................60
11.6.         Certain Definitions.........................................60
11.7.         Amendment...................................................61
11.8.         No Third Party Beneficiaries................................61
11.9.         Governing Law...............................................61
11.10.        Entire Agreement............................................61
11.11.        Validity....................................................61

                  EXHIBIT A - Form of Company Affiliate Letter





<PAGE>



                          AGREEMENT AND PLAN OF MERGER


         AGREEMENT  AND PLAN OF MERGER,  dated as of July 16, 1997, by and among
TEL-SAVE HOLDINGS,  INC., a Delaware  corporation  ("Acquiror"),  TSHCo, INC., a
Delaware corporation ("Merger Sub"), a Delaware corporation ("Merger Sub") and a
wholly owned subsidiary of Acquiror, and SHARED TECHNOLOGIES FAIRCHILD,  INC., a
Delaware   corporation  (the  "Company"  and,  together  with  Merger  Sub,  the
"Constituent Corporations").


                              W I T N E S S E T H :

         WHEREAS,  the Boards of  Directors  of Acquiror  and the  Company  have
approved  the merger of the Company  with and into  Merger Sub,  with Merger Sub
being the survivor (the "Merger"),  upon the terms and subject to the conditions
set forth herein and in accordance with the laws of the State of Delaware;

         WHEREAS,  for federal  income tax  purposes,  it is  intended  that the
Merger shall qualify as a tax free reorganization within  the meaning of Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"); and

         WHEREAS,  for accounting  purposes it is intended that the Merger shall
be accounted for as a pooling-of-interests.

         NOW,  THEREFORE,  in  consideration  of the  premises and of the mutual
covenants and agreements herein contained,  the parties hereto,  intending to be
legally bound, agree as follows:


<PAGE>


                                       -2-


                                    ARTICLE I

                                     MERGER


         1.1. The Merger.  At the Effective Time (as hereinafter  defined),  the
Company shall be merged with and into Merger Sub as provided herein.  Thereupon,
the  corporate  existence  of Merger  Sub,  with all its  purposes,  powers  and
objects,  shall  continue  unaffected  and  unimpaired  by the  Merger,  and the
corporate identity and existence,  with all the purposes, powers and objects, of
the  Company  shall be merged  with and into  Merger  Sub and  Merger Sub as the
corporation  surviving the Merger  (hereinafter  sometimes called the "Surviving
Corporation") shall continue its corporate existence under the laws of the State
of Delaware.

         1.2. Filing.  As soon as practicable after the fulfillment or waiver of
the  conditions  set forth in Sections 9.1, 9.2 and 9.3 or on such later date as
may be mutually agreed to between  Acquiror and the Company,  the parties hereto
will cause to be filed with the office of the Secretary of State of the State of
Delaware, a certificate of merger (the "Certificate of Merger"), in such form as
required by, and executed in  accordance  with,  the relevant  provisions of the
Delaware General Corporation Law ("DGCL").

         1.3. Effective Time of the Merger. The Merger shall be effective at the
time of the filing of the Certificate of Merger with the office of the Secretary
of State of the State of  Delaware,  or at such  later  time  specified  in such
Certificate  of  Merger,  which  time is  herein  sometimes  referred  to as the
"Effective  Time" and the date  thereof is herein  sometimes  referred to as the
"Effective Date."


                                   ARTICLE II

                   CERTIFICATE OF INCORPORATION; BY-LAWS; ETC.


         2.1. Certificate of Incorporation and By-Laws of Surviving Corporation.
The  Certificate  of  Incorporation  and  By-Laws  of Merger  Sub,  as in effect
immediately   prior  to  the  Effective  Time,   shall  be  the  Certificate  of
Incorporation and By-Laws of the Surviving  Corporation until thereafter amended
as provided by law.



<PAGE>


                                       -3-


         2.2.  Directors of Surviving  Corporation.  The directors of Merger Sub
immediately  prior to the Effective  Time shall continue as the directors of the
Surviving  Corporation,  in each case until  their  successors  are  elected and
qualified or until their earlier death, resignation or removal.

         2.3. Board of Directors of Acquiror. At or prior to the Effective Time,
Jeffrey J.  Steiner,  as  designee of The  Fairchild  Corporation  ("TFC"),  and
Anthony D. Autorino shall be elected to the Board of Directors of Acquiror, each
to serve for a term of three years or until the earlier  death,  resignation  or
removal of such person, provided, however, that if Mr. Steiner is unable to be a
director for the full 3-year term due to his death or  incapacitation,  then the
Board of  Directors  of the Company  shall fill such  vacancy by electing to the
Board  of  Directors  such  member  of  Mr.  Steiner's  immediate  family  as is
designated by TFC; provided that such family member is reasonably  acceptable to
Acquiror and provided  further that it is expressly  agreed to and accepted that
Eric Steiner and Natalia Steiner Hercot are acceptable designees.

         2.4.  Shareholders  Agreement.  At the Effective Time, the Shareholders
Agreement  dated as of March 13, 1996 by and among RHI Holdings,  Inc.  ("RHI"),
Mr.  Autorino and the Company shall be terminated and such agreement shall be of
no further  force or effect  from and after the  Effective  Time.  To the extent
necessary,  each  such  party  shall  waive  its  respective  rights  under  the
Shareholders  Agreement  in  favor  of the  transactions  contemplated  by  this
Agreement.


                                   ARTICLE III

                       MERGER CONSIDERATION; CONVERSION OR
                      CANCELLATION OF SHARES IN THE MERGER


         3.1. Share  Consideration;  Conversion or Cancellation of Shares in the
Merger. Subject to the provisions of this Article III, at the Effective Time, by
virtue of the Merger and without any action on the part of the holders  thereof,
the shares of the Constituent Corporations shall be converted as follows:

                  (a) Each share of common stock,  par value $.004 per share, of
         the  Company  (the  "Company  Common  Stock")  issued  and  outstanding
         immediately prior to the Effective Time (other than shares owned by the
         Company or Acquiror) shall



<PAGE>


                                       -4-


         be converted  into the right to receive the number of duly  authorized,
         validly issued,  fully paid and  nonassessable  shares of common stock,
         par value $.01 per share (the  "Acquiror  Common  Stock"),  of Acquiror
         (the "Merger  Consideration"),  calculated  by dividing (x) $11.25 plus
         the  product  of (i) .3 and (ii) the amount by which the  Closing  Date
         Market  Price  exceeds  $20 by (y) the Closing  Date  Market  Price (as
         hereinafter  defined),  rounded to four decimal  places (such  fraction
         being referred to herein as the "Exchange Ratio");  provided,  however,
         that the Exchange  Ratio shall in no event be greater  than 1.125.  If,
         prior to the  Effective  Time,  Acquiror  should  split or combine  the
         Acquiror  Common  Stock,  or  pay  a  stock  dividend  or  other  stock
         distribution in shares of Acquiror  Common Stock,  or otherwise  change
         the Acquiror Common Stock into any other securities,  or make any other
         dividend or  distribution  on the  Acquiror  Common  Stock  (other than
         normal  quarterly  dividends  as the same may be adjusted  from time to
         time  in  the  ordinary  course),  then  the  Exchange  Ratio  will  be
         appropriately adjusted to reflect such split, combination,  dividend or
         other distribution or change. For purposes of this Agreement,  "Closing
         Date Market Price" means,  with respect to one share of Acquiror Common
         Stock,  the  average  closing  price for such share as  reported on the
         National  Association of Securities  Dealers,  Inc. Automated Quotation
         System  ("NASDAQ")  for the 15 most recent  trading  days ending on the
         third business day prior to the Closing Date.

                  (b) All shares of Company  Common Stock to be  converted  into
         shares of Acquiror  Common  Stock  pursuant  to this  Section 3.1 shall
         cease to be outstanding,  shall be canceled and retired and shall cease
         to exist, and each holder of a certificate representing any such shares
         shall  thereafter cease to have any rights with respect to such shares,
         except the right to receive for each of such shares, upon the surrender
         of  such  certificate  in  accordance  with  Section  3.2,  the  Merger
         Consideration  and cash in lieu of fractional shares of Acquiror Common
         Stock as contemplated by Section 3.3.

                  (c) Each share of common stock,  par value $1.00 per share, of
         Merger Sub issued and  outstanding  immediately  prior to the Effective
         Time shall remain  outstanding  and shall represent one share of common
         stock of the Surviving Corporation.

                  (d)  Each share of Series C Preferred Stock, par



<PAGE>


                                       -5-


         value $.01 per share,  of the Company  (the  "Series C Stock") and each
         share of Series D  Preferred  Stock,  par value $.01 per share,  of the
         Company (the "Series D Stock" and together with the Series C Stock, the
         "Series Preferred  Stock") issued and outstanding  immediately prior to
         the Effective  Time (other than shares owned by Acquiror or the Company
         and  except  for  shares  held  by  persons  who  demand  appraisal  in
         compliance with all provisions of the DGCL concerning the right of such
         holders to dissent from the Merger and demand appraisal of their shares
         ("Dissenting  Holders")  but only if  holders  of such  shares are then
         entitled  to so dissent  and demand  appraisal  rights  pursuant to the
         DGCL) shall,  at the  Effective  Time,  be converted  into the right to
         receive  shares  of a  series  of  preferred  stock  of  Acquiror  (the
         "Acquiror Preferred Stock") having terms substantially identical to the
         terms of the Series Preferred Stock, provided, however, that the Acqui-
         ror Preferred  Stock shall be convertible  into the number of shares of
         Acquiror  Common Stock equal to the product of the  Exchange  Ratio and
         the respective number of shares of Company Common Stock into which such
         shares of Series Preferred Stock were convertible  immediately prior to
         the Effective Time.

                  (e) If  holders  of  shares  of  Series  Preferred  Stock  are
         entitled  to dissent  from the Merger  and  demand  appraisal  of their
         shares  under the DGCL,  any  issued and  outstanding  shares of Series
         Preferred  Stock held by a Dissenting  Holder shall not be converted as
         described in Section 3.1(d) but shall from and after the Effective Time
         represent  only  the  right to  receive  such  consideration  as may be
         determined to be due to such Dissenting  Holder pursuant to Section 262
         of the DGCL;  provided,  however,  that each share of Series  Preferred
         Stock outstanding immediately prior to the Effective Time and held by a
         Dissenting Holder who shall, after the Effective Time,  withdraw his or
         her  demand  for  appraisal  or lose his or her right of  appraisal  in
         either case pursuant to the DGCL,  shall be deemed to be converted,  as
         of the Effective Time, pursuant to Section 3.1(d) hereof.

                  (f) Each share of Series I 6% Cumulative Convertible Preferred
         Stock,  par value $100.00 per share,  of the Company (the  "Convertible
         Preferred  Stock")  issued and out  standing  immediately  prior to the
         Effective  Time (other than  shares  owned by Acquiror or the  Company)
         shall,  at the Effective  Time, be converted  into the right to receive
         the Merger Consideration that would be deliverable in



<PAGE>


                                       -6-


         respect  of the  shares  of the  Company  Common  Stock  issuable  upon
         conversion of the  Convertible  Preferred  Stock in accordance with the
         certificate of designation of the Convertible  Preferred  Stock,  which
         shares of Acquiror Common Stock into which such  Convertible  Preferred
         Stock is  converted  shall be subject to the  Pledge  Agreement,  dated
         March 13, 1996 (the "Pledge Agreement").

                  (g) Each share of Series J Redeemable Special Preferred Stock,
         par value  $.01 per  share,  of the  Company  (the  "Special  Preferred
         Stock") issued and outstanding  immediately prior to the Effective Time
         (other than shares  owned by Acquiror  or the  Company)  shall,  at the
         Effective  Time,  be  converted  into the right to receive an amount in
         cash from Acquiror (the "Special Preferred Consideration"),  the amount
         of which  shall be  determined  in  accordance  with  Section  5 of the
         certificate of designation of the Special Preferred Stock, which amount
         shall be pledged  collateral under and subject to the Pledge Agreement,
         and RHI shall  deliver to the pledge  agent under the Pledge  Agreement
         shares of Acquiror  Common  Stock  (valued at the  Closing  Date Market
         Price) equal to the Special Preferred Consideration and in substitution
         therefor  (it being  agreed  that such shares are at least equal to the
         fair market value of the Special  Preferred  Consideration for purposes
         of the terms of the Pledge Agreement).

                  (h) All shares of Company Common Stock, Series C Stock, Series
         D Stock,  Convertible Preferred Stock and Special Preferred Stock which
         are owned by Acquiror or the Company in each case shall be canceled and
         shall  cease to  exist,  and no  consideration  shall be  delivered  in
         exchange therefor.

                  (i) Each option to  purchase  shares of Company  Common  Stock
         (each an "Option") issued by the Company pursuant to the Company's 1996
         Equity  Incentive Plan or its 1994 Director Option Plan  (collectively,
         the  "Stock  Option  Plans"),  outstanding  and  unexercised  as of the
         Effective Date whether or not vested or  exercisable,  shall be assumed
         by  Acquiror,  and each  such  Option  shall  constitute  an  option to
         acquire, on the same terms and conditions as were applicable under such
         assumed Option (giving effect to any accelerated vesting pursuant to an
         applicable  agreement),  the number of shares of Acquiror  Common Stock
         equal to the product of the Exchange  Ratio and the number of shares of
         Company Common Stock subject to such Option, at a price per share equal
         to the aggregate exercise price



<PAGE>


                                       -7-


         for the shares of Company  Common Stock subject to such Option  divided
         by the  number of full  shares of  Acquiror  Common  Stock  deemed,  as
         provided  above, to be purchasable  pursuant to such Option;  provided,
         however,  that (i) subject to the provisions of clause (ii) below,  the
         number of shares of Acquiror  Common Stock that may be  purchased  upon
         exercise of such Option  shall not include any  fractional  shares and,
         upon the last such  exercise of such Option,  a cash  payment  shall be
         made for any  fractional  share based upon the per share average of the
         highest  and lowest sale price of shares of  Acquiror  Common  Stock as
         reported on NASDAQ on the date of such exercise and (ii) in the case of
         any Option to which  Section  421 of the Code  applies by reason of its
         qualification  under Section 422 or Section 423 of the Code ("qualified
         stock  options"),  the option price,  the number of shares  purchasable
         pursuant  to such  Option and the terms and  conditions  of exercise of
         such Option shall be  determined in order to comply with Section 424 of
         the Code. At the Effective  Time,  Acquiror shall deliver to holders of
         Options appropriate option agreements representing the right to acquire
         shares of Acquiror  Common Stock on the terms and  conditions set forth
         above,  upon surrender of the  outstanding  Options,  or Acquiror shall
         comply  with the terms of the Stock  Option  Plans as they apply to the
         Options assumed as set forth above.

                  Pursuant to the Shared  Technologies  Inc.  1987 Stock  Option
         Plan  (the  "1987  Option  Plan")  all  options  (the  "1987  Options")
         outstanding under the 1987 Option Plan shall terminate at the Effective
         Time and each holder of a 1987 Option shall have the right  immediately
         prior to the  Effective  Time to  exercise  his or her 1987  Options in
         whole  or in part,  notwithstanding  that  such  1987  Options  are not
         otherwise exercisable.

                  The  Stock  Option  Plans  and  the  1987  Option  Plan  shall
         terminate as of the  Effective  Time,  and the  provisions in any other
         benefit plan of the Company  providing  for the  issuance,  transfer or
         grant of any capital stock of the Company or any interest in respect of
         any  capital  stock  of  the  Company  shall  be  terminated  as of the
         Effective  Time,  and the  Company  shall  ensure  that  following  the
         Effective  Time  no  holder  of an  Option  or a  1987  Option,  and no
         participant  in any Stock  Option  Plan,  the 1987 Option Plan or other
         benefit  plan,  shall have any right  thereunder to acquire any capital
         stock of the Company or the Surviving Corporation.



<PAGE>


                                       -8-


                  (j) Each  Warrant to purchase  shares of Company  Common Stock
         issued  by  the  Company  and  outstanding  and  unexercised  as of the
         Effective Time (each a "Warrant"),  whether or not exercisable shall be
         assumed by  Acquiror,  and shall  constitute  a right to acquire on the
         same  terms  and  conditions  as were  applicable  under  such  assumed
         Warrants,  the number of shares of Acquiror  Common  Stock equal to the
         product  of the  Exchange  Ratio and the  number  of shares of  Company
         Common Stock  subject to such Warrant at a price per share equal to the
         aggregate  exercise  price for the shares of Company  Common  Stock for
         which such Warrant is exercisable  divided by the number of full shares
         of Acquiror  Common  Stock  deemed to be  purchasable  pursuant to such
         Warrant;  provided,  however,  that the  number of  shares of  Acquiror
         Common Stock that may be purchased  upon exercise of such Warrant shall
         not include any  fractional  shares and, upon the last such exercise of
         such  Warrant,  a cash payment shall be made for any  fractional  share
         based upon the per share  average of the  highest and lowest sale price
         of shares of Acquiror Common Stock as reported on NASDAQ on the date of
         such exercise. At the Effective Time, Acquiror shall deliver to holders
         of  Warrants  appropriate  warrants  representing  the right to acquire
         shares of Acquiror  Common  Stock on the same terms and  conditions  as
         contained  in the  outstanding  Warrants  (subject  to any  adjustments
         required by the preceding sentence),  upon surrender of the outstanding
         Warrants.

                  (k)  Acquiror  shall take all  corporate  action  necessary to
         reserve for issuance a sufficient  number of shares of its Common Stock
         for delivery upon  exercise of the Options and the Warrants  assumed in
         accordance  with this Section 3.1.  Acquiror  shall file a registration
         statement on Form S-8 (or any  successor  form) or another  appropriate
         form,  effective  as of the  Effective  Time,  with respect to Acquiror
         Common  Stock  subject  to such  Options  and shall use all  reasonable
         efforts to maintain the effectiveness of such registration statement or
         registration  statements  (and  maintain  the  current  status  of  the
         prospectuses  contained  therein)  for so long as such  Options  remain
         outstanding.  With respect to those  individuals  who subsequent to the
         Merger  will be subject to the  reporting  requirements  under  Section
         16(a) of the Exchange Act,  Acquiror  shall  administer  the Options of
         such persons  pursuant to this Section 3.1(d) in a manner that complies
         with Rule 16b-3  promulgated  under the  Exchange Act to the extent the
         applicable  Stock  Option  Plan  complied  with such rule  prior to the
         Merger.



<PAGE>


                                       -9-


         3.2. Payment for Shares in the Merger. The manner of making payment for
shares in the Merger shall be as follows:

                  (a) At the Effective Time, Acquiror shall make available to an
         exchange agent  selected by Acquiror and  reasonably  acceptable to the
         Company (the  "Exchange  Agent"),  for the benefit of those persons who
         immediately  prior to the  Effective  Time were the  holders of Company
         Common Stock, Series C Stock, Series D Stock, or Convertible  Preferred
         Stock, a sufficient number of certificates representing Acquiror Common
         Stock  required  to  effect  the  delivery  of  the  aggregate   Merger
         Consideration  required  to be  issued  pursuant  to  Section  3.1 (the
         certificates   representing   Acquiror  Common  Stock  comprising  such
         aggregate Merger  Consideration  being  hereinafter  referred to as the
         "Exchange  Fund").  The Exchange  Agent shall,  pursuant to irrevocable
         instructions  from the  Acquiror,  deliver the  Acquiror  Common  Stock
         contemplated  to be issued pursuant to Section 3.1 and effect the sales
         provided for in Section 3.3 out of the Exchange Fund. The Exchange Fund
         shall not be used for any other purpose.

                  (b) Promptly  after the  Effective  Time,  the Exchange  Agent
         shall  mail to each  holder  of record  (other  than  Acquiror  and the
         Company) of a certificate or certificates  (which  immediately prior to
         the Effective  Time  represented  outstanding  shares of Company Common
         Stock,  Series C Stock,  Series D Stock or Convertible  Preferred Stock
         (the  "Certificates")) (i) a form of letter of transmittal (which shall
         specify that delivery shall be effected, and the risk of loss and title
         to the  Certificates  shall  pass,  only upon  proper  delivery  of the
         Certificates  to the Exchange Agent) and (ii)  instructions  for use in
         effecting the surrender of the Certificates for payment therefor.  Upon
         surrender of  Certificates  for  cancellation  to the  Exchange  Agent,
         together  with such letter of  transmittal  duly executed and any other
         required  documents,  the holder of such Certificates shall be entitled
         to receive  for each of the shares of Company  Common  Stock,  Series C
         Stock,  Series  D  Stock  and  Convertible   Preferred  Stock  formerly
         represented  by such  Certificates  the  Merger  Consideration  and the
         Certificates so surrendered shall forthwith be canceled; provided  that
         for  holders  of shares of  Convertible  Preferred  Stock,  the  Merger
         Consideration shall be delivered directly to the pledge agent under the
         Pledge   Agreement,   and  provided   further   that,   of  the  Merger
         Consideration deliverable to RHI in respect of shares of Company Common
         Stock held by RHI, a certificate for such number of



<PAGE>


                                      -10-


         shares of  Acquiror  Common  Stock as equals the result of the  Special
         Preferred  Consideration divided by the Closing Date Market Price shall
         be  delivered to RHI by delivery  thereof  directly to the pledge agent
         under the Pledge  Agreement in substitution  for the Special  Preferred
         Consideration  then held by such pledge agent, and, upon receipt by the
         pledge  agent of such  certificate  to be held  thereafter  as  pledged
         collateral  under  the  Pledge   Agreement,   such  Special   Preferred
         Consideration  will be released by such pledge  agent to RHI.  Until so
         surrendered,  Certificates  shall represent solely the right to receive
         the Merger Consideration or the Special Preferred Consideration, as the
         case may be, and any cash in lieu of fractional  Acquiror  Common Stock
         as  contemplated  by  Section  3.3 with  respect  to each of the shares
         formerly represented thereby. No dividends or other distributions  that
         are  declared  after the  Effective  Time on Acquiror  Common Stock and
         payable to the holders of record  thereof after the Effective Time will
         be paid to persons entitled by reason of the Merger to receive Acquiror
         Common Stock until such persons surrender their Certificates. Upon such
         surrender,  there  shall be paid to the Person in whose name the shares
         of the  Acquiror  Common  Stock  are  issued  any  dividends  or  other
         distributions  on such  Acquiror  Common Stock that shall have a record
         date after the Effective Time and prior to such surrender and a payment
         date  after  such  surrender  and  such  payment  shall be made on such
         payment  date.  In no event shall the persons  entitled to receive such
         dividends  or other  distributions  be entitled to receive  interest on
         such dividends or other distributions,  except to the extent so paid to
         all   stockholders  of  Acquiror.   If  any  cash  or  any  certificate
         representing Acquiror Common Stock is to be paid to or issued in a name
         other  than  that in which  the  Certificate  surrendered  in  exchange
         therefor is  registered,  it shall be a condition of such exchange that
         the Certificate so surrendered shall be properly endorsed and otherwise
         in  proper  form  for  transfer  and that the  Person  requesting  such
         exchange  shall pay to the  Exchange  Agent any transfer or other taxes
         required by reason of the issuance of  certificates  for such  Acquiror
         Common Stock in a name other than that of the registered  holder of the
         Certificate surrendered,  or shall establish to the satisfaction of the
         Exchange  Agent  that  such  tax has  been  paid or is not  applicable.
         Notwithstanding the foregoing, neither the Exchange Agent nor any party
         hereto shall be liable to a holder of shares of Company  Common  Stock,
         Series C Stock, Series D Stock or Convertible Preferred Stock for



<PAGE>


                                      -11-


         any Acquiror  Common Stock or dividends  thereon or, in accordance with
         Section 3.3, proceeds of the sale of fractional interests, delivered to
         a public  official  pursuant to  applicable  escheat  law. The Exchange
         Agent shall not be entitled to vote or exercise any rights of ownership
         with  respect  to  Acquiror  Common  Stock held by it from time to time
         hereunder, except that it shall receive and hold all dividends or other
         distributions  paid or distributed with respect to such Acquiror Common
         Stock for the account of the persons entitled thereto.

                  (c)  Certificates  surrendered  for  exchange  by  any  person
         constituting an affiliate of the Company for purposes of Rule 145 under
         the Securities Act shall not be exchanged for certificates representing
         Acquiror  Common Stock until Acquiror has received a written  agreement
         from such person as provided in Section 8.12.

                  (d) Any  portion  of the  Exchange  Fund  and  the  Fractional
         Securities Fund (as hereinafter defined) which remains unclaimed by the
         former  stockholders  of the Company  for one year after the  Effective
         Time shall be delivered by the Exchange Agent to Acquiror,  upon demand
         of  Acquiror,   and  any  former  stockholders  of  the  Company  shall
         thereafter  look only to  Acquiror  for  payment of their claim for the
         Merger Consideration in respect of Company Common Stock or for any cash
         in lieu of fractional shares of Acquiror Common Stock.

                  (e) At the Effective  Time,  Acquiror shall deliver to RHI, as
         the holder of the  Special  Preferred  Stock,  by wire  transfer to the
         pledge  agent  under  the  Pledge  Agreement,   as  pledged  collateral
         thereunder,  the Special Preferred  Consideration upon surrender of the
         certificates evidencing the Special Preferred Stock.

         3.3.  Fractional  Shares. No fraction of Acquiror Common Stock shall be
issued in the Merger. In lieu of any such fractional securities,  each holder of
Company Common Stock,  Series C Stock,  Series D Stock or Convertible  Preferred
Stock who would  otherwise  have been entitled to a fraction of Acquiror  Common
Stock upon surrender of Certificates  for exchange  pursuant to this Article III
will  be paid an  amount  in cash  (without  interest)  equal  to such  holder's
proportionate  interest in the net  proceeds  from the sale or sales in the open
market by the Exchange  Agent on behalf of all such  holders,  of the  aggregate
shares of fractional  Acquiror Common Stock issued pursuant to this Article III.
As soon as practicable following



<PAGE>


                                      -12-


the Effective  Time,  the Exchange  Agent shall  determine the excess of (i) the
number of full shares of Acquiror  Common Stock  delivered to the Exchange Agent
by Acquiror  over (ii) the  aggregate  number of full shares of Acquiror  Common
Stock to be distributed  (such excess being herein called the "Excess  Shares"),
and the Exchange  Agent,  as agent for the former holders of shares,  shall sell
the Excess Shares at the prevailing prices on the NASDAQ. The sale of the Excess
Shares by the Exchange Agent shall be executed on the NASDAQ through one or more
member  firms of the  NASDAQ and shall be  executed  in round lots to the extent
practicable.  Acquiror  shall  pay all  commissions,  transfer  taxes  and other
out-of-pocket  transaction costs, including the expenses and compensation of the
Exchange Agent,  incurred in connection  with such sale of Excess Shares.  Until
the net proceeds of such sale have been  distributed to the former  stockholders
of the  Company,  the Exchange  Agent will hold such  proceeds in trust for such
former  stockholders (the "Fractional  Securities Fund"). As soon as practicable
after the determination of the amount of cash to be paid to former  stockholders
of the Company in lieu of any fractional interest, the Exchange Agent shall make
available  in  accordance  with  this  Agreement  such  amounts  to such  former
stockholders.

         3.4.  Transfer of Shares  After the  Effective  Time.  No  transfers of
Company  Common Stock,  Series C Stock,  Series D Stock,  Convertible  Preferred
Stock,  or Special  Preferred Stock shall be made on the stock transfer books of
the  Company  after  the close of  business  on the day prior to the date of the
Effective Time. If, after the Effective Time,  certificates are presented to the
Surviving Corporation, they shall be cancelled and exchanged as provided in this
Article II.



<PAGE>


                                      -13-


                                   ARTICLE IV

                          CERTAIN EFFECTS OF THE MERGER


         4.1. Effect of the Merger. On and after the Effective Time and pursuant
to the DGCL, the Surviving Corporation shall possess all the rights, privileges,
immunities,  powers, and purposes of each of Merger Sub and the Company; all the
property, real and personal, including subscriptions to shares, causes of action
and every  other  asset  (including  books and  records)  of Merger  Sub and the
Company,  shall vest in the Surviving  Corporation  without further act or deed;
and  the  Surviving   Corporation  shall  assume  and  be  liable  for  all  the
liabilities,  obligations  and  penalties  of  Merger  Sub and the  Company.  No
liability  or  obligation  due or to become  due and no claim or demand  for any
cause  existing  against either Merger Sub or the Company,  or any  stockholder,
officer or director thereof, shall be released or impaired by the Merger, and no
action or  proceeding,  whether  civil or  criminal,  then pending by or against
Merger Sub or the  Company,  or any  stockholder,  officer or director  thereof,
shall abate or be discontinued by the Merger,  but may be enforced,  prosecuted,
settled or  compromised  as if the Merger had not  occurred,  and the  Surviving
Corporation  may be  substituted  in any such action or  proceeding  in place of
Merger Sub or the Company.

         4.2. Further  Assurances.  If at any time after the Effective Time, any
further  action is  necessary  or  desirable  to carry out the  purposes of this
Agreement  and to vest the  Surviving  Corporation  with full  right,  title and
possession to all assets, property, rights, privileges, powers and franchises of
either of Merger Sub or the Company,  the officers of such corporation are fully
authorized  in the name of their  corporation  or otherwise  to take,  and shall
take, all such further action.


                                    ARTICLE V

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY


         The Company  represents  and  warrants  to  Acquiror  and Merger Sub as
follows:

         5.1.  Organization  and  Qualification.  Each  of the  Company  and its
subsidiaries is a corporation duly organized,



<PAGE>


                                      -14-


validly  existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite  corporate power and authority to own, lease
and operate its properties and to carry on its business as now being  conducted.
Each  of the  Company  and  its  subsidiaries  is duly  qualified  as a  foreign
corporation to do business,  and is in good standing, in each jurisdiction where
the character of its properties  owned or leased or the nature of its activities
makes such qualification necessary, except for failures to be so qualified or in
good standing which would not, individually or in the aggregate, have a material
adverse  effect  on  the  general  affairs,  management,  business,  operations,
condition  (financial  or  otherwise)  or  prospects  of  the  Company  and  its
subsidiaries taken as a whole (a "Company Material Adverse Effect"). Section 5.1
of the Disclosure  Statement sets forth, with respect to the Company and each of
its  subsidiaries,  the  jurisdiction  in which they are  qualified or otherwise
licensed as a foreign corporation to do business. Neither the Company nor any of
its  subsidiaries is in violation of any of the provisions of its Certificate of
Incorporation (or other applicable charter document) or By-Laws. The Company has
delivered  to  Acquiror  accurate  and  complete  copies of the  Certificate  of
Incorporation (or other applicable  charter document) and By-Laws,  as currently
in effect, of each of the Company and its subsidiaries.

         5.2.  Capital  Stock of  Subsidiaries.  The  only  direct  or  indirect
subsidiaries  of the Company are those  listed in Section 5.2 of the  Disclosure
Statement  previously  delivered  by the  Company to Acquiror  (the  "Disclosure
Statement").  The  Company is  directly  or  indirectly  the record  (except for
directors'  qualifying  shares) and beneficial  owner  (including all qualifying
shares owned by directors  of such  subsidiaries  as reflected in Section 5.2 of
the Disclosure  Statement) of all of the outstanding  shares of capital stock of
each of its subsidiaries,  there are no proxies with respect to such shares, and
no equity  securities of any of such  subsidiaries  are or may be required to be
issued by reason of any options, warrants, scrip, rights to subscribe for, calls
or commitments of any character  whatsoever relating to, or securities or rights
convertible  into or  exchangeable  for, shares of any capital stock of any such
subsidiary,  and  there  are  no  contracts,   commitments,   understandings  or
arrangements by which any such subsidiary is bound to issue additional shares of
its  capital  stock or  securities  convertible  into or  exchangeable  for such
shares. Other than as set forth in Section 5.2 of the Disclosure Statement,  all
of such  shares so owned by the  Company  are  validly  issued,  fully  paid and
nonassessable and are owned by



<PAGE>


                                      -15-


it free and clear of any claim,  lien or  encumbrance  of any kind with  respect
thereto.  Except as disclosed in Section 5.2 of the  Disclosure  Statement,  the
Company does not  directly or  indirectly  own any interest in any  corporation,
partnership, joint venture or other business association or entity.

         5.3.  Capitalization.  The  authorized  capital  stock  of the  Company
consists  of  50,000,000  shares of Company  Common  Stock,  par value $.004 per
share, and 25,000,000  shares of preferred  stock,  $.01 par value per share, of
which 5,000,000  shares have been designated  Series C Stock,  1,000,000  shares
have been designated Series D Stock,  250,000 shares have been designated Series
I Convertible  Preferred Stock and 200,000 shares have been designated  Series J
Special  Preferred  Stock. As of the date hereof,  15,904,146  shares of Company
Common Stock were issued and outstanding and 1,318,950 shares of preferred stock
were  issued and  outstanding.  All of such  issued and  outstanding  shares are
validly issued,  fully paid and nonassessable and free of preemptive  rights. As
of the date hereof (x)  2,255,920  shares of Company  Common Stock were reserved
for  issuance  upon  exercise of  outstanding  options and  4,619,319  shares of
Company  Common Stock were reserved for issuance  upon  exercise of  outstanding
convertible  preferred  securities  and (y) 2,653,381  shares of Company  Common
Stock were reserved for issuance  upon  exercise of the  Warrants,  all of which
warrants, options and Stock Option Plans are listed and described in Section 5.3
of the Disclosure Statement. Other than the Stock Option Plans and the Warrants,
the  Company  has no other  plan  which  provides  for the grant of  options  or
warrants to purchase  shares of capital  stock,  stock  appreciation  or similar
rights or stock awards. Except as set forth above, there are not now, and at the
Effective Time,  except for shares of Company Common Stock issued after the date
hereof  upon the  conversion  of  convertible  securities  and the  exercise  of
Warrants and Options outstanding on the date hereof or pursuant to the Company's
401(k)  Plan,  there will not be, any  shares of  capital  stock of the  Company
issued or outstanding or any subscriptions,  options,  warrants,  calls, claims,
rights (including  without limitation any stock appreciation or similar rights),
convertible  securities  or other  agreements  or  commitments  of any character
obligating  the Company to issue,  transfer or sell any of its  securities.  The
Company has paid all dividends  payable through June 30, 1997 in respect of each
of the  Series  C  Preferred  Stock,  the  Series  D  Preferred  Stock  and  the
Convertible Preferred Stock.

         5.4. Authority Relative to This Agreement. The Company is a corporation
duly organized, validly existing and



<PAGE>


                                      -16-


in good  standing  under the laws of  Delaware.  The Company has full  corporate
power and  authority to execute and deliver each of this  Agreement and the STFI
Agreement  and to  consummate  the  Merger and other  transactions  contemplated
hereby and thereby.  The execution  and delivery of this  Agreement and the STFI
Agreement and the consummation of the Merger and other transactions contemplated
hereby  and  thereby  have  been  duly and  validly  authorized  by the Board of
Directors of the Company and no other  corporate  proceedings on the part of the
Company are necessary to authorize  this  Agreement and the STFI Agreement or to
consummate  the  Merger or other  transactions  contemplated  hereby or  thereby
(other  than,  with  respect  to the  Merger,  the  approval  of  the  Company's
stockholders  pursuant to Section 251(c) of the DGCL). Each of this Agreement or
the STFI  Agreement  has been duly and validly  executed  and  delivered  by the
Company and,  assuming the due  authorization,  execution and delivery hereof by
Acquiror and Merger Sub and thereof by Acquiror, constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except to the extent that its enforceability may be limited by applicable
bankruptcy, insolvency,  reorganization,  moratorium or other laws affecting the
enforcement of creditors'  rights generally or by general equitable or fiduciary
principles.



<PAGE>


                                      -17-


         5.5. No Violations, etc.

                  (a)  Assuming  that  all  filings,  permits,   authorizations,
         consents  and  approvals  or  waivers  thereof  have  been duly made or
         obtained as contemplated by Section 5.5(b) hereof,  except as listed in
         Section 5.5 of the  Disclosure  Statement,  neither the  execution  and
         delivery of this Agreement or the STFI Agreement by the Company nor the
         consummation of the Merger or other transactions contemplated hereby or
         thereby nor compliance by the Company with any of the provisions hereof
         will (i) violate, conflict with, or result in a breach of any provision
         of, or constitute a default (or an event which, with notice or lapse of
         time or both,  would  constitute  a  default)  under,  or result in the
         termination or suspension of, or accelerate  the  performance  required
         by, or result  in a right of  termination  or  acceleration  under,  or
         result  in the  creation  of any  lien,  security  interest,  charge or
         encumbrance  upon any of the properties or assets of the Company or any
         of its subsidiaries  under, any of the terms,  conditions or provisions
         of (x) their respective charters or by-laws, (y) except as set forth in
         Section 5.5 of the  Disclosure  Statement,  any note,  bond,  mortgage,
         indenture  or deed of trust,  or (z) any license,  lease,  agreement or
         other  instrument  or  obligation  to  which  the  Company  or any such
         subsidiary  is a party  or to  which  they or any of  their  respective
         properties or assets may be subject, or (ii) subject to compliance with
         the statutes and regulations referred to in the next paragraph, violate
         any judgment, ruling, order, writ, injunction, decree, statute, rule or
         regulation  applicable to the Company or any of its subsidiaries or any
         of  their  respective  properties  or  assets,  except,  in the case of
         clauses  (i), (z) and  (ii) above,  for  such  violations,   conflicts,
         breaches, defaults, terminations, suspensions, accelerations, rights of
         termination or acceleration or creations of liens,  security interests,
         charges  or  encumbrances  which  would  not,  individually  or in  the
         aggregate,  either have a Company Material Adverse Effect or materially
         impair  the  Company's  ability  to  consummate  the  Merger  or  other
         transactions contemplated hereby.

                  (b) No filing or  registration  with,  notification  to and no
         permit,  authorization,  consent or approval of any governmental entity
         (including,  without limitation, any federal, state or local regulatory
         authority or agency) is required by the Company in connection  with the
         execution and delivery of this Agreement or the STFI Agreement or



<PAGE>


                                      -18-


         the  consummation  by the  Company of the Merger or other  transactions
         contemplated  hereby or  thereby,  except  (i) in  connection  with the
         applicable requirements of the Hart-Scott-Rodino Antitrust Improvements
         Act of 1976,  as  amended  (the  "HSR  Act"),  (ii) the  filing  of the
         Certificate of Merger with the Secretary of State of the State of Dela-
         ware, (iii) the approval of the Company's  stockholders pursuant to the
         DGCL,  (iv) filings with  applicable  state public utility  commissions
         identified in Section 5.5 of the Disclosure Statement, (v) filings with
         the SEC and (vi)  such  other  filings,  registrations,  notifications,
         permits, authorizations,  consents or approvals the failure of which to
         be obtained, made or given would not, individually or in the aggregate,
         either have a Company Material Adverse Effect or materially  impair the
         Company's  ability  to  consummate  the  Merger  or other  transactions
         contemplated hereby or thereby.

                  (c) The Company and its  subsidiaries  are not in violation of
         or default under,  except as set forth in Section 5.5 of the Disclosure
         Statement, (x) any note, bond, mortgage, indenture or deed of trust, or
         (y) any license,  lease, agreement or other instrument or obligation to
         which the Company or any such subsidiary is a party or to which they or
         any of their respective properties or assets may be subject, except, in
         the case of clauses (x) and (y) above,  for such violations or defaults
         which  would  not,  individually  or in the  aggregate,  either  have a
         Company  Material  Adverse  Effect or  materially  impair the Company's
         ability to  consummate  the Merger or other  transactions  contemplated
         hereby.  It is understood that the Company has certain covenants in its
         bank  facilities  which the  Company  from time to time may violate and
         that  such  violations  shall  not be  deemed a  breach  so long as the
         Company  promptly  seeks,  and in a reasonable  period of time obtains,
         waivers of such  violations  from the  lenders  under  such  facilities
         (unless such  lenders  have  accelerated  the  indebtedness  under such
         facilities).

         5.6. Commission Filings;  Financial  Statements.  The Company has filed
all forms,  reports,  schedules,  statements and other documents  required to be
filed by it since December 31, 1994 (as  supplemented and amended since the time
of filing  collectively,  the "SEC  Reports")  with the  Securities and Exchange
Commission  (the  "SEC"),  each of which  complied  when  filed in all  material
respects with all  applicable  requirements  of the  Securities  Act of 1933, as
amended, and the rules and regulations  promulgated  thereunder (the "Securities
Act") and



<PAGE>


                                      -19-


the Securities  Exchange Act of 1934, as amended,  and the rules and regulations
promulgated  thereunder (the "Exchange Act"). The audited consolidated financial
statements  and  unaudited  consolidated  interim  financial  statements of  the
Company and its  subsidiaries  included or incorporated by reference in such SEC
Reports have been  prepared in accordance  with  generally  accepted  accounting
principles  applied on a consistent basis during the periods involved (except as
may be  indicated  in the notes  thereto)  and present  fairly,  in all material
respects, the financial position and results of operations and cash flows of the
Company and its subsidiaries on a consolidated basis at the respective dates and
for the  respective  periods  indicated  (and in the case of all such  financial
statements that are interim financial statements,  contain all adjustments so to
present fairly).  None of the SEC Reports contained at the time filed any untrue
statement of a material  fact or omitted to state any material  fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.

         5.7.  Absence of Changes or Events.  Except as set forth in Section 5.7
of the  Disclosure  Statement and in the Company's Form 10-K for the fiscal year
ended  December 31, 1996, as filed with the SEC,  since  December 31, 1996,  the
Company and its subsidiaries have not incurred any material liability, except in
the ordinary  course of their  businesses  consistent with their past practices,
and there has not been any change, or any event involving a prospective  change,
in the business,  financial condition or results of operations of the Company or
any of its  subsidiaries  which has had,  or is  reasonably  likely  to have,  a
Company  Material  Adverse  Effect and the  Company  and its  subsidiaries  have
conducted their  respective  businesses in the ordinary  course  consistent with
their past practices.

         5.8. Joint Proxy Statement.  None of the information  supplied or to be
supplied  by or on behalf of the  Company  for  inclusion  or  incorporation  by
reference in the registration  statement to be filed with the SEC by Acquiror in
connection  with the  issuance of shares of Acquiror  Common Stock in the Merger
(the "Form S-4")  will,  at the time the Form S-4  becomes  effective  under the
Securities Act, contain any untrue statement of a material fact or omit to state
any  material  fact  required  to be stated  therein  or  necessary  to make the
statements  therein,  in light of the circumstances  under which they were made,
not  misleading.  None of the  information  supplied  or to be supplied by or on
behalf of the Company for inclusion or  incorporation  by reference in the joint
proxy statement, in



<PAGE>


                                      -20-


definitive  form,  relating to the Company  Stockholder  Meeting (as hereinafter
defined) and the Acquiror  Stockholder Meeting (as hereinafter  defined),  or in
the  related  proxy and  notice  of  meeting,  or  soliciting  material  used in
connection  therewith  (referred  to herein  collectively  as the  "Joint  Proxy
Statement")  will, at the dates mailed to  stockholders  and at the times of the
Company Stockholder Meeting and the Acquiror  Stockholder  Meeting,  contain any
untrue  statement of a material fact or omit to state any material fact required
to be stated  therein or necessary in order to make the statements  therein,  in
light of the circumstances  under which they are made, not misleading.  The Form
S-4 and the Joint Proxy  Statement  (except for  information  relating solely to
Acquiror  and Merger Sub) will comply as to form in all material  respects  with
the  provisions  of the  Securities  Act and the  Exchange Act and the rules and
regulations promulgated thereunder.

         5.9.  Litigation.  Except as set forth in Section 5.9 of the Disclosure
Statement,  there is no (i) claim, action, suit or proceeding pending or, to the
best knowledge of the Company or any of its subsidiaries,  threatened against or
relating  to the  Company  or  any  of its  subsidiaries  before  any  court  or
governmental or regulatory  authority or body or arbitration  tribunal,  or (ii)
outstanding judgment, order, writ, injunction or decree, or application, request
or motion therefor, of any court, governmental agency or arbitration tribunal in
a proceeding to which the Company, any subsidiary of the Company or any of their
respective  assets was or is a party except, in the case of clauses (i) and (ii)
above,  such as would  not,  individually  or in the  aggregate,  either  have a
Company  Material Adverse Effect or materially  impair the Company's  ability to
consummate the Merger.

         5.10.  Title to and  Condition  of  Properties.  Except as set forth in
Section 5.10 of the Disclosure Statement,  the Company and its subsidiaries have
good title to all of the real  property  and own  outright  all of the  personal
property  (except  for leased  property  or assets)  which is  reflected  on the
Company's and its subsidiaries'  December 31, 1996 audited  consolidated balance
sheet  contained in the Company's  Form 10-K for the fiscal year ended  December
31, 1996 filed with the SEC (the "Balance Sheet") except for property since sold
or otherwise  disposed of in the ordinary course of business and consistent with
past practice.

         5.11.  Contracts  and  Commitments.  Other than as disclosed in Section
5.11 of the  Disclosure  Statement,  no existing  material  contract or material
commitment of the



<PAGE>


                                      -21-


Company  or any of its  subsidiaries,  or as to which any  thereof is a party or
their  respective  assets are bound,  contains an agreement  with respect to any
change of control that would be triggered by the Merger. Other than as set forth
in Section 5.11 of the Disclosure Statement,  neither this Agreement, the Merger
nor the other  transactions  contemplated  hereby will result in any outstanding
loans or  borrowings by the Company or any  subsidiary  of the Company  becoming
due,  going  into  default  or  giving  the  lenders  or other  holders  of debt
instruments the right to require the Company or any of its subsidiaries to repay
all or a portion  of such loans or  borrowings;  provided  that it is  expressly
understood  and agreed  that the  Company is not making any  representations  or
warranties  with respect to the effect of the financial  condition or results of
operation of Acquiror and Merger Sub.

         5.12.  Labor Matters.  Each of the Company and its  subsidiaries  is in
compliance  in  all  material  respects  with  all  applicable  laws  respecting
employment  and  employment  practices,  terms and  conditions of employment and
wages and hours,  and neither the Company nor any of its subsidiaries is engaged
in any unfair labor  practice.  There is no labor  strike,  slowdown or stoppage
pending (or, to the best knowledge of the Company,  any labor strike or stoppage
threatened)  against or  affecting  the Company or any of its  subsidiaries.  No
petition  for  certification  has been filed and is pending  before the National
Labor Relations Board with respect to any employees of the Company or any of its
subsidiaries who are not currently organized.

         5.13.  Compliance  with  Law.  Except  for  matters  set  forth  in the
Disclosure  Statement,  neither  the  Company  nor any of its  subsidiaries  has
violated or failed to comply with any statute, law, ordinance,  regulation, rule
or order  of any  foreign,  federal,  state or  local  government  or any  other
governmental  department  or  agency,  or any  judgment,  decree or order of any
court, applicable to its business or operations, except where any such violation
or failure to comply would not, individually or in the aggregate, have a Company
Material  Adverse  Effect;  the  conduct of the  business of the Company and its
subsidiaries is in conformity with all foreign, federal, state and local energy,
public utility and health requirements,  and all other foreign,  federal,  state
and  local   governmental  and  regulatory   requirements,   except  where  such
nonconformities  would not,  individually  or in the  aggregate,  have a Company
Material  Adverse  Effect.  The Company and its  subsidiaries  have all permits,
licenses and franchises  from  governmental  agencies  required to conduct their
businesses as now being conducted,



<PAGE>


                                      -22-


except for such permits, licenses and franchises the absence of which would not,
individually or in the aggregate, have a Company Material Adverse Effect.

         5.14. Board Recommendation.  The Board of Directors of the Company has,
by a  majority  vote at a meeting  of such  Board  duly  held on July 16,  1997,
approved  and  adopted  this  Agreement,  the Merger and the other  transactions
contemplated  hereby,  determined that the Merger is fair to the stockholders of
the Company and  recommended  that the  stockholders  of the Company approve and
adopt this Agreement, the Merger and the other transactions contemplated hereby.

         5.15.  Patents and Trademarks.  The Company and its subsidiaries own or
have the right to use all patents,  patent applications,  trademarks,  trademark
applications,  trade names,  inventions,  processes,  know-how and trade secrets
necessary to the conduct of their respective businesses,  except for those which
the  failure to own or have the right to use would not,  individually  or in the
aggregate, have a Company Material Adverse Effect ("Proprietary Rights").

         5.16. Taxes. "Tax" or "Taxes" shall mean all federal,  state, local and
foreign taxes, duties, levies, charges and assessments of any nature,  including
social  security  payments  and  deductibles  relating  to wages,  salaries  and
benefits and payments to subcontractors (to the extent required under applicable
Tax law), and also including all interest,  penalties and additions imposed with
respect to such amounts.  Except as set forth in Section 5.16 of the  Disclosure
Statement:  (i) the Company and its subsidiaries  have prepared and timely filed
or will timely file with the  appropriate  governmental  agencies all franchise,
income and all other  material Tax returns and reports  required to be filed for
any period  ending on or before the  Effective  Time,  taking  into  account any
extension of time to file granted to or obtained on behalf of the Company and/or
its subsidiaries; (ii) all material Taxes of the Company and its subsidiaries in
respect  of the  pre-Merger  period  have  been  paid  in  full  to  the  proper
authorities,  other  than such  Taxes as are being  contested  in good  faith by
appropriate  proceedings  and/or are adequately  reserved for in accordance with
generally accepted accounting principles;  (iii) all deficiencies resulting from
Tax examinations of federal,  state and foreign income,  sales and franchise and
all other  material Tax returns filed by the Company and its  subsidiaries  have
either  been  paid  or  are  being   contested  in  good  faith  by  appropriate
proceedings;  (iv) to the best knowledge of the Company,  no deficiency has been
asserted or assessed



<PAGE>


                                      -23-


against  the  Company  or any of its  subsidiaries,  and no  examination  of the
Company or any of its  subsidiaries  is pending or  threatened  for any material
amount of Tax by any  taxing  authority;  (v) no  extension  of the  period  for
assessment  or  collection  of any  material  Tax is  currently in effect and no
extension  of time  within  which  to file  any  material  Tax  return  has been
requested, which Tax return has not since been filed; (vi) no material Tax liens
have been filed with  respect to any Taxes;  (vii) the  Company  and each of its
subsidiaries  will not make any  voluntary  adjustment  by reason of a change in
their accounting methods for any pre-Merger period that would affect the taxable
income or  deductions of the Company or any of its  subsidiaries  for any period
ending after the Effective Date;  (viii) the Company and its  subsidiaries  have
made timely  payments of the Taxes required to be deducted and withheld from the
wages paid to their employees; and (ix) the Company and its subsidiaries are not
parties to any tax sharing or tax matters  agreement  other than the tax sharing
agreement dated March 13, 1996 by and among TFC, RHI and the Company.

         5.17.  Employee  Benefit Plans;  ERISA.  Except as set forth in Section
5.17 of the Disclosure Statement:

         (a) There are no "employee pension benefit plans" as defined in Section
3(2)  of the  Employee  Retirement  Income  Security  Act of  1974,  as  amended
("ERISA"),   maintained  or  contributed  to  by  the  Company  or  any  of  its
subsidiaries,  or with  respect to which the Company or any of its  subsidiaries
contributes  or is obligated to make  payments  thereunder or otherwise may have
any liability ("Pension Benefits Plans").

         (b)  The  Company  has  furnished  Acquiror  with a true  and  complete
schedule of all "welfare  benefit  plans" (as defined in Section 3(1) of ERISA),
maintained or contributed to by the Company or any of its  subsidiaries  or with
respect to which the Company or any of its  subsidiaries  otherwise may have any
liability ("Welfare Plans"), all multiemployer plans as defined in Section 3(37)
of ERISA covering  employees  employed in the United States to which the Company
or any of its  subsidiaries is required to make  contributions  or otherwise may
have any  liability,  all stock bonus,  stock option,  restricted  stock,  stock
appreciation right, stock purchase,  bonus,  incentive,  deferred  compensation,
severance and vacation or other employee benefit plans, programs or arrangements
that are not Pension Benefit Plans or Welfare Plans maintained or contributed to
by the  Company or a  subsidiary  or with  respect  to which the  Company or any
subsidiary otherwise may have any liability ("Other Plans").



<PAGE>


                                      -24-


         (c) The Company and each of its  subsidiaries,  and each of the Pension
Benefit Plans, Welfare Plans and Other Plans (collectively, the "Plans"), are in
compliance  with  the  applicable  provisions  of  ERISA,  the  Code  and  other
applicable laws except where the failure to comply would not, individually or in
the aggregate, have a Company Material Adverse Effect.

         (d) All  contributions  to,  and  payments  from,  the Plans  which are
required to have been made in accordance  with the Plans and,  when  applicable,
Section  302 of ERISA or Section  412 of the Code have been  timely  made except
where the failure to make such contributions or payments on a timely basis would
not,  individually or in the aggregate,  have a Company Material Adverse Effect.
All  contributions  required to have been made in accordance with Section 302 of
ERISA  or  Section  412 of the Code to any  employee  pension  benefit  plan (as
defined  in  Section  3(2) of  ERISA)  maintained  by the  Company  or any ERISA
Affiliate  have  been  timely  made  except  where  the  failure  to  make  such
contributions  on a timely basis would not individually or in the aggregate have
a Company  Material  Adverse  Effect.  For  purposes of this  Agreement,  "ERISA
Affiliate" shall mean any person (as defined in Section 3(9) of ERISA) that is a
member of any group of persons  described in Section 414(b),  (c), (m) or (o) of
the Code of which the Company or a subsidiary of the Company is a member.

         (e) The Pension  Benefit Plans intended to qualify under Section 401 of
the Code are so  qualified  and have been  determined  by the  Internal  Revenue
Service  ("IRS") to be so qualified and nothing has occurred with respect to the
operation  of such  Pension  Benefit  Plans  which  would cause the loss of such
qualification or exemption or the imposition of any material liability,  penalty
or tax under  ERISA or the Code.  Such  plans  have been or will be, on a timely
basis, (i) amended to comply with changes to the Code made by the Tax Reform Act
of 1986, the  Unemployment  Compensation  Amendments of 1992, the Omnibus Budget
Reconciliation  Act of 1993,  and other  applicable  legislative,  regulatory or
administrative requirements;  and (ii) submitted to the Internal Revenue Service
for a  determination  of their tax  qualification,  as so  amended;  and no such
amendment will adversely affect the qualification of such plans.

         (f) Each  Welfare  Plan that is intended to qualify  for  exclusion  of
benefits thereunder from the income of participants or for any other tax-favored
treatment  under any  provisions  of the Code  (including,  without  limitation,
Sections 79, 105, 106, 125 or 129 of the Code) is and has been maintained in



<PAGE>


                                      -25-


compliance in all material  respects  with all pertinent  provisions of the Code
and Treasury Regulations thereunder.

         (g) Except as disclosed in the Company's  Form 10-K for the fiscal year
ended December 31, 1996, there are (i) no investigations, audits or examinations
pending, or to the best knowledge of the Company, threatened by any governmental
entity involving any of the Plans, (ii) no termination proceedings involving the
Plans  and  (iii)  no  pending  or,  to the  best  of the  Company's  knowledge,
threatened claims (other than routine claims for benefits), suits or proceedings
against  any Plan,  against  the assets of any of the  trusts  under any Plan or
against any  fiduciary of any Plan with respect to the operation of such plan or
asserting any rights or claims to benefits  under any Plan or against the assets
of any trust under such plan,  which would,  in the case of clause (i),  (ii) or
(iii)  of  this  paragraph  (g),  give  rise  to  any  liability   which  would,
individually or in the aggregate,  have a Company Material Adverse Effect,  nor,
to the best of the  Company's  knowledge,  are there any facts  which would give
rise to any liability  which would,  individually  or in the  aggregate,  have a
Company Material Adverse Effect in the event of any such  investigation,  audit,
examination, claim, suit or proceeding.

         (h) None of the Company, any of its subsidiaries or any employee of the
foregoing, nor any trustee,  administrator,  other fiduciary or any other "party
in interest" or "disqualified  person" with respect to the Pension Benefit Plans
or Welfare Plans, has engaged in a "prohibited  transaction" (within the meaning
of Section 4975 of the Code or Section 406 of ERISA)  which  presents a material
risk of resulting in a tax or penalty on the Company or any of its  subsidiaries
under  Section  4975  of the  Code or  Section  502(i)  of  ERISA  which  would,
individually or in the aggregate, have a Company Material Adverse Effect.

         (i) Neither the Pension  Benefit Plans subject to Title IV of ERISA nor
any  trust  created  thereunder  has been  terminated  nor have  there  been any
"reportable  events"  (as defined in Section  4043 of ERISA and the  regulations
thereunder)  with respect to either thereof which would,  individually or in the
aggregate,  have a Company  Material Adverse Effect nor has there been any event
with respect to any Pension  Benefit Plan  requiring  disclosure  under  Section
4063(a) of ERISA or any event with respect to any Pension Benefit Plan requiring
disclosure under Section 4041(c)(3)(C) of ERISA which would,  individually or in
the aggregate, have a Company Material Adverse Effect.



<PAGE>


                                      -26-


         (j)  Neither the  Company  nor any ERISA  Affiliate  of the Company has
incurred any currently  outstanding  liability to the Pension  Benefit  Guaranty
Corporation (the "PBGC") or to a trustee  appointed under Section 4042(b) or (c)
of ERISA  other than for the  payment of  premiums,  all of which have been paid
when due. No Pension Benefit Plan has applied for, or received,  a waiver of the
minimum  funding  standards  imposed by Section 412 of the Code. The information
supplied  to the actuary by the  Company or any of its  subsidiaries  for use in
preparing the most recent actuarial report for Pension Benefit Plans is complete
and accurate in all material respects.

         (k) Neither the Company, any of its subsidiaries nor any of their ERISA
Affiliates has any liability  (including any contingent  liability under Section
4204 of ERISA) with  respect to any  multiemployer  plan,  within the meaning of
Section 3(37) of ERISA (a "Multiemployer Plan"),  covering employees employed in
the United States.

         (l) With  respect  to each of the Plans,  true,  correct  and  complete
copies of the following documents have been made available to Acquiror:  (i) the
current plans and related trust documents,  including  amendments thereto,  (ii)
any current summary plan descriptions, (iii) the most recent Forms 5500 (if any)
filed with respect to each such Plan, (iv) the three recent financial statements
and actuarial  reports,  if  applicable,  (v) the most recent IRS  determination
letter, if applicable;  (vi) if any application for an IRS determination  letter
is  pending,  copies  of  all  such  applications  for  determination  including
attachments,  exhibits and  schedules  thereto,  (vii) all  material  agreements
(including  settlement  agreements or other similar  agreements  relating to any
Plan); and (viii) all material correspondence between the Company and any of its
subsidiaries  and the IRS, PBGC,  Department of Labor or any other  governmental
entity relating to any of the Plans.

         (m) Neither the Company,  any of its subsidiaries,  any organization to
which the Company is a successor  or parent  corporation,  within the meaning of
Section 4069(b) of ERISA,  nor any of their ERISA  Affiliates has engaged in any
transaction  described  in Section  4069(a) of ERISA,  the  liability  for which
would, individually or in the aggregate, have a Company Material Adverse Effect.

         (n) Except as disclosed in Section  5.17 of the  Disclosure  Statement,
none of the Welfare Plans  maintained by the Company or any of its  subsidiaries
are retiree life or retiree health insurance plans which provide for continuing



<PAGE>


                                      -27-


benefits or coverage for any  participant  or any  beneficiary  of a participant
following  termination  of  employment,  except  as may be  required  under  the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), or
except  where the full  expense  of such  coverage  or  benefits  is paid by the
participant  or the  participant's  beneficiary.  The  Company  and  each of its
subsidiaries  which maintain a "group health plan" within the meaning of Section
5000(b)(1)  of  the  Code  have  complied  with  the  notice  and   continuation
requirements of Section 4980B of the Code,  COBRA, Part 6 of Subtitle B of Title
I of ERISA and the  regulations  thereunder  except  where the failure to comply
would not,  individually or in the aggregate,  have a Company  Material  Adverse
Effect.

         (o) No  liability  under  any  Plan has  been  funded  nor has any such
obligation  been  satisfied  with the  purchase of a contract  from an insurance
company as to which the Company or any of its  subsidiaries  has received notice
that such insurance company is in rehabilitation.

         (p) The consummation of the transactions contemplated by this Agreement
will not  either  alone  or in  connection  with an  employee's  termination  of
employment or other event result in an increase in the amount of compensation or
benefits  or  accelerate  the  vesting or timing of payment of any  benefits  or
compensation  payable to or in respect of any  employee of the Company or any of
its subsidiaries.

         5.18. Environmental Matters. Except as set forth in Section 5.18 of the
Disclosure  Statement and except for such matters as would not,  individually or
in the aggregate, have a Company Material Adverse Effect:

                  (a)  The  Company  and  its  subsidiaries  have  obtained  all
         Environmental  Permits and all  licenses and other  authorizations  and
         have  made all  registrations  and  given  all  notifications  that are
         required under any applicable Environmental Law.

                  (b)  Except as set  forth in  Section  5.18 of the  Disclosure
         Statement,  there is no Environmental Claim pending against the Company
         and its subsidiaries under an Environmental Law.

                  (c)  Except as set  forth in  Section  5.18 of the  Disclosure
         Statement,  the Company and its subsidiaries are in compliance with all
         terms  and  conditions  of  their  Environmental  Permits,  and  are in
         compliance with all



<PAGE>


                                      -28-


         applicable Environmental Laws.

                  (d)  Except as set  forth in  Section  5.18 of the  Disclosure
         Statement,  the Company and its subsidiaries  did not generate,  treat,
         store,  transport,  discharge,  dispose  of or  release  any  Hazardous
         Materials on or from any property now or  previously  owned,  leased or
         used by the Company and its subsidiaries.

                  (e)  For purposes of Section 5.18(a):

                            (i)  "Environment"  shall  mean any  surface  water,
                  ground  water,  or  drinking  water  supply,  land  surface or
                  subsurface  strata,  or  ambient  air  and  includes,  without
                  limitation, any indoor location;

                           (ii)  "Environmental  Claim" means any written notice
                  or written claim by any person  alleging  potential  liability
                  (including,   without  limitation,   potential  liability  for
                  investigatory  costs,  cleanup costs,  governmental  costs, or
                  harm,  injuries or damages to any person,  property or natural
                  resources,  and any fines or penalties)  arising out of, based
                  upon,   resulting  from  or  relating  to  (1)  the  emission,
                  discharge,  disposal or other release or threatened release in
                  or into the  Environment  of any  Hazardous  Materials  or (2)
                  circumstances  forming the basis of any violation,  or alleged
                  violation, of any applicable Environmental Law;

                          (iii) "Environmental  Laws" means any federal,  state,
                  and local laws, codes, and regulations as now or previously in
                  effect relating to pollution,  the protection of human health,
                  the protection of the Environment or the emission,  discharge,
                  disposal or other release or  threatened  release of Hazardous
                  Materials in or into the Environment;

                           (iv)  "Environmental  Permit"  shall  mean a  permit,
                  identification  number, license or other written authorization
                  required under any applicable Environmental Law; and

                           (v) "Hazardous  Materials" shall mean all pollutants,
                  contaminants,  or  chemical,  hazardous  or  toxic  materials,
                  substances,   constituents  or  wastes,   including,   without
                  limitation,   asbestos   or   asbestos-containing   materials,
                  polychlorinated biphenyls and



<PAGE>


                                      -29-


                  petroleum,   oil,  or   petroleum   or  oil   derivatives   or
                  constituents,  including, without limitation, crude oil or any
                  fraction thereof.

         5.19. Disclosure. All of the facts and circumstances not required to be
disclosed as  exceptions  under or to any of the foregoing  representations  and
warranties  made by the  Company,  in this  Article V by  reason of any  minimum
disclosure requirement in any such representation and warranty would not, in the
aggregate, have a Company Material Adverse Effect.

         5.20.  Absence  of  Undisclosed  Liabilities.  Except  as set  forth in
Section  5.20 of the  Disclosure  Statement,  neither the Company nor any of its
subsidiaries has any liabilities or obligations of any nature, whether absolute,
accrued, unmatured, contingent or otherwise, or any unsatisfied judgments or any
leases of personalty or realty or unusual or extraordinary  commitments,  except
the liabilities recorded on the Company's consolidated balance sheet at December
31, 1996  included in the financial  statements  referred in Section 5.6 and the
notes  thereto,  and except  for  liabilities  or  obligations  incurred  in the
ordinary course of business and consistent with past practice since December 31,
1996 that would not  individually  or in the aggregate  have a Company  Material
Adverse Effect.

         5.21.  Finders or Brokers.  Except as set forth in Section  5.21 of the
Disclosure Statement,  none of the Company, the subsidiaries of the Company, the
Board of  Directors  or any member of the Board of  Directors  has  employed any
investment  banker,  broker,  finder  or  intermediary  in  connection  with the
transactions  contemplated  hereby  who  might  be  entitled  to a  fee  or  any
commission in  connection  with the Merger,  and Section 5.21 of the  Disclosure
Statement sets forth the maximum consideration (present and future) agreed to be
paid to each such party.

         5.22.  State  Antitakeover   Statutes.  The  Company  has  granted  all
approvals and taken all other steps necessary to exempt the Merger and the other
transactions contemplated hereby from the requirements and provisions of Section
203 of  the  DGCL  and  any  other  applicable  state  antitakeover  statute  or
regulation  such that none of the  provisions  of such  Section 203 or any other
"business   combination,"   "moratorium,"   "control   share"  or  other   state
antitakeover  statute or  regulation  (x)  prohibits or restricts  the Company's
ability to  perform  its  obligations  under this  Agreement  or its  ability to
consummate the Merger and the other transactions  contemplated hereby, (y) would
have the effect of invalidating or voiding this Agreement



<PAGE>


                                      -30-


any provision hereof,  or (z) would subject Acquiror to any material  impediment
or  condition  in  connection  with the exercise of any of its rights under this
Agreement.

         5.23.  Opinion of  Financial  Advisor.  The  Company has  received  the
opinion of Deutsche Morgan  Grenfell Inc. dated the date of this  Agreement,  to
the effect that,  as of such date,  the Exchange  Ratio is fair from a financial
point of view to the holders of shares of Company Common Stock and to holders of
shares of any series of Preferred Stock of the Company.

         5.24.  Insurance.  Section 5.24 of the Disclosure  Statement  lists all
insurance  policies  in  force  on the  date  hereof  covering  the  businesses,
properties and assets of the Company and its subsidiaries, and all such policies
are currently in effect.

         5.25.  Employment and Labor  Contracts.  Neither the Company nor any of
its subsidiaries is a party to any employment contract or other similar contract
or any other contract for the provision of management or consulting  services to
the  Company  or any of its  subsidiaries  with  any  past or  present  officer,
director,  employee  or,  to the best of the  Company's  knowledge,  any  entity
affiliated  with any past or present  officer,  director or employee  other than
those set forth in Section 5.25 of the  Disclosure  Statement and other than the
agreements  executed  by  employees  generally,  the  forms of which  have  been
delivered to Acquiror.

         5.26. Pending  Transactions.  Section 5.26 of the Disclosure  Statement
lists the status of the Pending Transactions.

         5.27.  Indemnification  Agreements.  Each  of the  RHI  Indemnification
Agreement, the FHC Indemnification Agreement and the Pledge Agreement is a valid
and binding agreement of the Company and, to the knowledge of the Company,  each
of  such  agreements  is  enforceable   against  RHI  and  TFC,  FHC,  and  RHI,
respectively,  except to the extent that such  enforceability  may be limited by
applicable  bankruptcy,  insolvency,  reorganization,  moratorium  or other laws
affecting the enforcement of creditors' rights generally or by general equitable
or fiduciary  principles.  Each of the RHI  Indemnification  Agreement,  the FHC
Indemnification Agreement and the Pledge Agreement shall inure to the benefit of
the Surviving  Corporation and shall be enforceable by the Surviving Corporation
except to the extent  that such  enforceability  may be  limited  by  applicable
bankruptcy, insolvency, reorganization, moratorium or other laws



<PAGE>


                                      -31-


affecting the enforcement of creditors' rights generally or by general equitable
or fiduciary principles.  As of the date hereof, the Company has no knowledge of
any  liabilities  or claims for which the Company is  indemnified  under the RHI
Indemnification  Agreement and FHI Indemnification Agreement (other than the (i)
contingent  liabilities  related to a dispute with the United States  Government
under government contract accounts rules concerning  potential liability arising
out of the use of and  accounting  for  approximately  $50.0  million  in excess
pension  funds  relating to certain  government  contracts  in the  discontinued
aerospace  business  of  FII;  (ii)  all  non-telecommunications   environmental
liabilities of FII; and (iii)  approximately  $50.0 million (at June 30, 1995 of
costs associated with post-retirement  healthcare benefits of FII) as such items
are  described in the  Company's  Annual  Report on Form 10-K for the year ended
December  31,  1996)  that  would  (were  the  indemnification   under  the  RHI
Indemnification  Agreement and FHI  Indemnification  Agreement  not  available),
individually or in the aggregate, have a Company Material Adverse Effect.

         5.28.   Indemnified    Liabilities.    Notwithstanding   all   of   the
representations  and warranties  contained in this Article V (except for Section
5.27),  it is hereby  agreed that the Company need not disclose as exceptions to
any of the foregoing representations and warranties any losses,  liabilities and
damages or actions or claims for which the Company is indemnified  under each of
the FHI Indemnification Agreement and the RHI Indemnification Agreement.


                                   ARTICLE VI

            REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB


         Each of Acquiror and Merger Sub jointly and  severally  represents  and
warrants to the Company that:

         6.1. Organization and Qualification.  Each of Acquiror,  Merger Sub and
Acquiror's subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the  jurisdiction of its  incorporation  and has
all  requisite  corporate  power and  authority  to own,  lease and  operate its
properties  and to  carry  on its  business  as now  being  conducted.  Each  of
Acquiror,  Merger Sub and Acquiror's subsidiaries is duly qualified as a foreign
corporation to do business,  and is in good standing, in each jurisdiction where
the character of its properties owned or leased or the nature



<PAGE>


                                      -32-


of its activities makes such qualification necessary,  except for failures to be
so  qualified  or in good  standing  which  would  not,  individually  or in the
aggregate,  have a material adverse effect on the general  affairs,  management,
business,  operations,  condition  (financial  or  otherwise)  or  prospects  of
Acquiror and its  subsidiaries  taken as a whole (an "Acquiror  Material Adverse
Effect").  Except  as set  forth in  Section  6.1 of the  Disclosure  Statement,
neither Acquiror,  Merger Sub nor any of Acquiror's subsidiaries is in violation
of  any  of the  provisions  of  its  Certificate  of  Incorporation  (or  other
applicable  charter document) or By-Laws.  Acquiror has delivered to the Company
accurate and  complete  copies of the  Certificate  of  Incorporation  (or other
applicable  charter  document) and By-Laws,  as currently in effect,  of each of
Acquiror and its subsidiaries.

         6.2.  Capital  Stock of  Subsidiaries.  The  only  direct  or  indirect
subsidiaries  of Acquiror as of the date hereof are those  listed in Section 6.2
of the Disclosure  Statement previously delivered by Acquiror to the Company. As
of the date hereof,  Acquiror is directly or indirectly  the record  (except for
directors'  qualifying  shares) and beneficial  owner  (including all qualifying
shares owned by directors  of such  subsidiaries  as reflected in Section 6.2 of
the Disclosure  Statement) of all of the outstanding  shares of capital stock of
each of its  subsidiaries.  All of the  capital  stock of Merger Sub will at all
times be owned  directly  by  Acquiror,  free and clear of any liens,  claims or
encumbrances.

         6.3. Capitalization.  The authorized capital stock of Acquiror consists
of 100,000,000  shares of Acquiror Common Stock,  par value $.01 per share,  and
5,000,000  shares of Preferred  Stock,  par value $.01 per share. As of July 15,
1997, 64,353,823 shares of Common Stock are issued and outstanding and no shares
of  preferred  stock  are  issued  and  outstanding.  All  of  such  issued  and
outstanding shares are validly issued,  fully paid and nonassessable and free of
preemptive rights.  Except as set forth above and except as disclosed in Section
6.3 of the Disclosure  Schedule,  there are not as of the date hereof any shares
of  capital  stock of  Acquiror  issued  or  outstanding  or any  subscriptions,
options, warrants, calls, claims, rights (including without limitation any stock
appreciation or similar rights),  convertible  securities or other agreements or
commitments of any character obligating Acquiror to issue,  transfer or sell any
of its securities.

         6.4. Authority Relative to This Agreement. Each of



<PAGE>


                                      -33-


Acquiror and Merger Sub has full  corporate  power and  authority to execute and
deliver  this  Agreement  and to  consummate  the Merger and other  transactions
contemplated  hereby.  The  execution  and  delivery of this  Agreement  and the
consummation of the Merger and other transactions  contemplated hereby have been
duly and validly authorized by the Board of Directors of Acquiror and Merger Sub
and no other  corporate  proceedings  on the part of Acquiror and Merger Sub are
necessary  to authorize  this  Agreement  or to  consummate  the Merger or other
transactions   contemplated  hereby  (other  than  the  approval  of  Acquiror's
stockholders  with  respect to the  issuance  of the  Acquiror  Common  Stock in
connection with the Merger as required by the rules of the National  Association
of  Securities  Dealers,  Inc. and the amendment of  Acquiror's  certificate  of
incorporation  to increase the number of  authorized  Shares of Acquiror  Common
Stock).  This  Agreement  has been duly and validly  executed  and  delivered by
Acquiror and, assuming the due  authorization,  execution and delivery hereof by
the Company, constitutes a valid and binding agreement of Acquiror,  enforceable
against  Acquiror in  accordance  with its terms,  except to the extent that its
enforceability   may  be   limited   by   applicable   bankruptcy,   insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally or by general equitable or fiduciary principles.



<PAGE>


                                      -34-


         6.5. No Violations, etc.

                  (a)  Assuming  that  all  filings,  permits,   authorizations,
consents  and  approvals  or waivers  thereof have been duly made or obtained as
contemplated  by Section  6.5(b)  hereof,  neither the execution and delivery of
this Agreement by Acquiror and Merger Sub nor the  consummation of the Merger or
other transactions contemplated hereby nor compliance by Acquiror and Merger Sub
with any of the provisions hereof will (i) violate,  conflict with, or result in
a breach of any provision  of, or constitute a default (or an event which,  with
notice or lapse of time or both, would constitute a default) under, or result in
the termination or suspension of, or accelerate the performance  required by, or
result  in a right of  termination  or  acceleration  under,  or  result  in the
creation of any lien,  security interest,  charge or encumbrance upon any of the
properties   or  assets  of  Acquiror  and  Merger  Sub  or  any  of  Acquiror's
subsidiaries  under,  any of the terms,  conditions  or  provisions of (x) their
respective  charters or  by-laws,  (y) except as set forth in Section 6.5 of the
Disclosure Statement,  any note, bond, mortgage,  indenture or deed of trust, or
(z) any license,  lease,  agreement or other instrument or obligation,  to which
Acquiror,  Merger Sub or any such  subsidiary is a party or to which they or any
of their  respective  properties  or assets may be subject,  or (ii)  subject to
compliance with the statutes and regulations  referred to in the next paragraph,
violate any judgment, ruling, order, writ, injunction,  decree, statute, rule or
regulation applicable to Acquiror,  Merger Sub or any of Acquiror's subsidiaries
or any of their respective properties or assets,  except, in the case of clauses
(i), (z) and (ii) above,  for such violations,  conflicts,  breaches,  defaults,
terminations,  suspensions, accelerations, rights of termination or acceleration
or creations of liens,  security interests,  charges or encumbrances which would
not, individually or in the aggregate,  either have an Acquiror Material Adverse
Effect or materially  impair  Merger Sub's  ability to consummate  the Merger or
other transactions contemplated hereby.

                  (b) No filing or  registration  with,  notification  to and no
permit,  authorization,  consent  or  approval  of any  governmental  entity  is
required by Acquiror, Merger Sub or any of Acquiror's subsidiaries in connection
with the  execution  and  delivery  of this  Agreement  or the  consummation  by
Acquiror of the Merger or other transactions  contemplated hereby, except (i) in
connection with the applicable  requirements of the Hart-Scott-Rodino  Antitrust
Improvements  Act of 1976,  as amended  (the "HSR Act"),  (ii) the filing of the
Certificate of Merger and the certificate of amendment of Acquiror's certificate
of



<PAGE>


                                      -35-


incorporation  with  the  Secretary  of State of the  State of  Delaware,  (iii)
filings  with the Federal  Communications  Commission  or any  applicable  state
public utility  commissions or applicable  state or local  regulatory  agency or
authority,  (iv)  filings  with  NASDAQ,  (v)  filings  with  the SEC and  state
securities  administrators,  (vi) the  approval of  Acquiror's  stockholders  as
required  by  NASDAQ  rules,  and  (vii)  such  other  filings,   registrations,
notifications,  permits,  authorizations,  consents or approvals  the failure of
which to be obtained, made or given would not, individually or in the aggregate,
either have an Acquiror  Material  Adverse  Effect or  materially  impair Merger
Sub's  ability  to  consummate  the  Merger or other  transactions  contemplated
hereby.

                  (c) As of the date hereof  except as set forth in Sections 6.5
of the Disclosure Statement (x) Acquiror, Merger Sub and Acquiror's subsidiaries
are not in violation of or default under any note, bond, mortgage,  indenture or
deed of trust,  or (y) any  license,  lease,  agreement or other  instrument  or
obligation to which Acquiror or any such  subsidiary is a party or to which they
or any of their respective  properties or assets may be subject,  except, in the
case of clauses (x) and (y) above,  for such  violations or defaults which would
not, individually or in the aggregate,  either have an Acquiror Material Adverse
Effect or materially  impair  Merger Sub's  ability to consummate  the Merger or
other transactions contemplated hereby.

         6.6. Commission Filings;  Financial Statements.  Except as set forth in
Section 6.6 of the  Disclosure  Schedule:  (a)  Acquiror  has filed all required
forms, reports,  schedules,  statements and other documents required to be filed
by it since  December 31, 1994 to the date hereof (as  supplemented  and amended
since the time of filing,  collectively,  the "Acquiror  SEC Reports")  with the
SEC,  all of  which  complied  when  filed  in all  material  respects  with all
applicable  requirements  of the  Securities  Act and the Exchange  Act; (b) the
audited  consolidated  financial  statements and unaudited  consolidated interim
financial  statements of Acquiror and its subsidiaries  included or incorporated
by reference  in such  Acquiror SEC Reports  were  prepared in  accordance  with
generally  accepted  accounting  principles applied on a consistent basis during
the periods  involved  (except as may be  indicated  in the notes  thereto)  and
present fairly, in all material respects,  the financial position and results of
operations and cash flows of the Acquiror and its subsidiaries on a consolidated
basis at the respective dates and for the respective  periods  indicated (and in
the case of all such financial statements that are interim financial



<PAGE>


                                      -36-


statements,  contain all adjustments so to present fairly);  and (c) none of the
Acquiror  SEC  Reports  contained  at the time filed any untrue  statement  of a
material  fact or  omitted  to state any  material  fact  required  to be stated
therein or necessary in order to make the  statements  therein,  in light of the
circumstances under which they were made, not misleading.

         6.7.  Absence of Changes or Events.  Except as set forth in  Acquiror's
Form 10-K for the fiscal year ended December 31, 1996, as filed with the SEC, or
except as set forth in Section 6.6 of the  Disclosure  Schedule,  since December
31, 1996 to the date hereof, Acquiror and its subsidiaries have not incurred any
material liability, except in the ordinary course of their businesses consistent
with  their  past  practices,  and there has not been any  change,  or any event
involving a prospective change, in the business,  financial condition or results
of  operations  of  Acquiror  or any of its  subsidiaries  which has had,  or is
reasonably  likely to have, an Acquiror Material Adverse Effect and Acquiror and
its subsidiaries have conducted their respective business in the ordinary course
consistent with their past practices.

         6.8. Joint Proxy Statement.  None of the information  supplied or to be
supplied  by  or  on  behalf  of  Acquiror  and  Merger  Sub  for  inclusion  or
incorporation  by  reference  in the  Form  S-4  will,  at the time the Form S-4
becomes  effective under the Securities Act,  contain any untrue  statement of a
material fact or omit to state any material  fact required to be stated  therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.  None of the information supplied or to be
supplied  by  or  on  behalf  of  Acquiror  and  Merger  Sub  for  inclusion  or
incorporation  by  reference  in the Joint Proxy  Statement  will,  at the dates
mailed to stockholders and at the times of the Company  Stockholder  Meeting and
the Acquiror  Stockholder  Meeting,  contain any untrue  statement of a material
fact or omit to state  any  material  fact  required  to be  stated  therein  or
necessary in order to make the statements therein, in light of the circumstances
under  which they are made,  not  misleading.  The Form S-4 and the Joint  Proxy
Statement (except for information relating solely to the Company) will comply as
to form in all material  respects with the  provisions of the Securities Act and
the Exchange Act and the rules and regulations promulgated thereunder.

         6.9. Board Recommendation. The Board of Directors of Acquiror has, by a
majority  vote at a meeting of such Board duly held on July 15,  1997,  approved
and adopted this Agree-



<PAGE>


                                      -37-


ment,  the Merger and the other  transactions  contemplated  hereby  (including,
without  limitation,  the  issuance of Acquiror  Common Stock as a result of the
Merger),  and  recommended  that the holders of shares of Acquiror  Common Stock
approve and adopt this  Agreement,  the Merger,  the issuance of Acquiror Common
Stock as a result of the Merger as required by NASDAQ and the other transactions
contemplated hereby.

         6.10. Disclosure. All of the facts and circumstances not required to be
disclosed as  exceptions  under or to any of the foregoing  representations  and
warranties made by Acquiror by reason of any minimum  disclosure  requirement in
any such  representation  and  warranty  would not,  in the  aggregate,  have an
Acquiror Material Adverse Effect.

         6.11.  Finders or Brokers.  Except as set forth in Section  6.11 of the
Disclosure Statement,  none of Acquiror, the subsidiaries of Acquiror, the Board
of Directors of Acquiror or any member of the Board of Directors of Acquiror has
employed any investment  banker,  broker,  finder or  intermediary in connection
with the transactions  contemplated hereby who might be entitled to a fee or any
commission in connection with of the Merger,  and Section 6.12 of the Disclosure
Statement sets forth the maximum consideration (present and future) agreed to be
paid to each such party.

         6.12. Opinion of Financial  Advisor.  Acquiror has received the opinion
(the  "Fairness  Opinion")  of  Salomon  Brothers  Inc  dated  the  date of this
Agreement, to the effect that as of such date, the Exchange Ratio is fair from a
financial point of view to Acquiror.



<PAGE>


                                      -38-


                                   ARTICLE VII

                       CONDUCT OF BUSINESS OF ACQUIROR AND
                         THE COMPANY PENDING THE MERGER


         7.1.  Conduct of Business of the Company Pending the Merger.  Except as
contemplated by this Agreement or as expressly agreed to in writing by Acquiror,
during the period from the date of this Agreement to the Effective Time, each of
the  Company and its  subsidiaries  will  conduct  their  respective  operations
according to its ordinary course of business consistent with past practice,  and
will use all  commercially  reasonable  efforts to preserve  intact its business
organization,  to keep  available the services of its officers and employees and
to maintain satisfactory relationships with suppliers,  distributors,  customers
and others having business  relationships  with it and will take no action which
would  materially  adversely affect the ability of the parties to consummate the
transactions contemplated by this Agreement.  Without limiting the generality of
the foregoing,  and except as otherwise  expressly  provided in this  Agreement,
prior to the Effective  Time, the Company will not nor will it permit any of its
subsidiaries  to, without the prior written  consent of Acquiror,  which consent
shall not be unreasonably withheld:

                  (a) amend its certificate of incorporation or by-laws;

                  (b) authorize for issuance,  issue, sell,  deliver,  grant any

         options for, or otherwise agree or commit to issue, sell or deliver any
         shares of any class of its capital stock or any securities  convertible
         into shares of any class of its capital  stock,  except (i) pursuant to
         and in accordance with the terms of currently  outstanding  convertible
         securities,  warrants and options, and (ii) shares granted to employees
         as matching  contributions  pursuant to the Company's 401(k) Plan in an
         aggregate amount not to exceed 40,000 shares;

                  (c) split,  combine or  reclassify  any shares of its  capital
         stock, declare, set aside or pay any dividend (other than a dividend of
         stock of Shared  Technologies  Cellular,  Inc. owned by the Company) or
         other  distribution   (whether  in  cash,  stock  or  property  or  any
         combination  thereof)  in respect  of its  capital  stock or  purchase,
         redeem or otherwise  acquire any shares of its own capital  stock or of
         any of its subsidiaries, except as otherwise



<PAGE>


                                      -39-


         expressly provided in this Agreement;

                  (d) (i) create, incur, assume, maintain or permit to exist any
         debt for borrowed  money other than under  existing  lines of credit in
         the ordinary  course of business  consistent  with past practice;  (ii)
         assume,  guarantee,  endorse or otherwise  become liable or responsible
         (whether  directly,  contingently  or otherwise) for the obligations of
         any other person except for (a) its wholly owned subsidiaries,  and (b)
         STF Canada, Inc. in the ordinary course of business and consistent with
         past  practices;   or  (iii)  make  any  loans,   advances  or  capital
         contributions  to, or  investments  in, any other person except for STF
         Canada, Inc. in an aggregate amount not to exceed $1,000,000;

                  (e) (i)  increase  in any manner the  compensation  of (x) any
          employee  except in the ordinary  course of business  consistent  with
          past  practice or (y) any of its  directors or  officers;  (ii) pay or
          agree to pay any  pension,  retirement  allowance  or  other  employee
          benefit  not  required,  or enter  into or  agree  to  enter  into any
          agreement or  arrangement  with such  director or officer or employee,
          whether  past or  present,  relating to any such  pension,  retirement
          allowance  or  other  employee  benefit,   except  as  required  under
          currently existing agreements, plans or arrangements;  (iii) grant any
          severance  or  termination  pay to, or enter  into any  employment  or
          severance  agreement  with,  (x) any  employee  except in the ordinary
          course of  business  consistent  with past  practice or (y) any of its
          directors  or  officers  except  for  honorarium  payments  to outside
          directors  of the  Company in an amount not to exceed  $300,000 in the
          aggregate; or (iv) except as may be required to comply with applicable
          law,  become  obligated  (other  than  pursuant  to any new or renewed
          collective  bargaining  agreement) under any new pension plan, welfare
          plan,  multiemployer plan, employee benefit plan, benefit arrangement,
          or similar plan or arrangement, which was not in existence on the date
          hereof, including any bonus, incentive,  deferred compensation,  stock
          purchase,  stock option,  stock  appreciation  right, group insurance,
          severance  pay,  retirement  or  other  benefit  plan,   agreement  or
          arrangement,  or employment or  consulting  agreement  with or for the
          benefit  of any  person,  or  amend  any of such  plans or any of such
          agreements in existence on the date hereof;  provided,  however,  that
          this clause (iv) shall not prohibit the Company from renewing any such
          plan,  agreement or arrangement  already in existence on terms no more
          favorable to the parties to such plan, agreement or arrange-



<PAGE>


                                      -40-


          ment;

                  (f)  except  as  otherwise  expressly   contemplated  by  this
          Agreement, enter into any other agreements,  commitments or contracts,
          except agreements,  commitments or contracts for the purchase, sale or
          lease of goods or  services  involving  payments  or  receipts  by the
          Company  or its  subsidiaries  in excess of  $50,000,  other  than (i)
          customer agreements,  (ii) leases for rental space in an amount not to
          exceed  $250,000  for any lease or (iii)  developer  agreements  in an
          amount not to exceed  $250,000 for any agreement;  provided,  however,
          that the  Company  will  not  enter  into  agreements  with any  local
          exchange  carriers,  competitive  local exchange carriers or incumbent
          local exchange  companies which require a financial  commitment by the
          Company or any of its  subsidiaries  or which limit the ability of the
          Company  or  any of  its  subsidiaries  to  conduct  their  respective
          business;

                  (g) authorize,  recommend, propose or announce an intention to
         authorize,  recommend  or  propose,  or  enter  into any  agreement  in
         principle or an agreement  with respect to, any plan of  liquidation or
         dissolution,  any  acquisition  of  a  material  amount  of  assets  or
         securities,  any sale, transfer,  lease, license,  pledge, mortgage, or
         other  disposition  or  encumbrance  of a material  amount of assets or
         securities or any material change in its  capitalization,  or any entry
         into a  material  contract  or any  amendment  or  modification  of any
         material  contract or any  release or  relinquishment  of any  material
         contract rights;

                  (h) authorize or commit to make capital expenditures in excess
         of $200,000 for any one order in the Company's  service business (other
         than purchases by the Company's systems business in the ordinary course
         of business consistent with past practice);

                  (i) make any change in the  accounting  methods or  accounting
         practices followed by the Company;

                  (j)  settle  any  action,   suit,   claim,   investigation  or
         proceeding (legal,  administrative or arbitrative) in excess of $50,000
         without  the  consent of the  Acquiror;  provided,  however,  that  the
         Company may settle the matter set forth in item 2 of Section 5.9 of the
         Disclosure Statement as previously discussed with Acquiror;

                  (k)  make any election under the Code which would



<PAGE>


                                      -41-


         have a Company Material Adverse Effect;

                  (l)  amend,  change  or  alter in any  respect  any of the RHI
         Indemnification  Agreement,  the FHC  Indemnification  Agreement or the
         Pledge   Agreement   (except  as  specifically   contemplated  by  this
         Agreement);

                  (m) take or cause to be  taken,  whether  before  or after the
         Effective  Time,  any  action  that  would  disqualify  the Merger as a
         "reorganization" within the meaning of Section 368(a) of the Code; or

                  (n)  agree to do any of the foregoing.

         7.2.  Conduct of  Business of  Acquiror  Pending the Merger.  Except as
contemplated  by this  Agreement  or as  expressly  agreed to in  writing by the
Company,  during the period  from the date of this  Agreement  to the  Effective
Time, each of Acquiror and its subsidiaries will use all commercially reasonable
efforts to keep  substantially  intact its  business,  properties  and  business
relationships  and will take no action which would  materially  adversely affect
the ability of the parties to consummate the  transactions  contemplated by this
Agreement.  Without  limiting the  generality  of the  foregoing,  and except as
otherwise  expressly  provided in this  Agreement,  prior to the Effective Time,
Acquiror  will not nor will it permit any of its  subsidiaries  to,  without the
prior written  consent of the Company,  which consent shall not be  unreasonably
withheld:

                  (a) amend its certificate of  incorporation or  by-laws except
         as set forth in this Agreement;

                  (b) split,  combine or  reclassify  any shares of its  capital
         stock,  declare,  set aside or pay any  dividend or other  distribution
         (whether  in cash,  stock or property  or any  combination  thereof) in
         respect of its capital stock or purchase,  redeem or otherwise  acquire
         any  shares  of its own  capital  stock or of any of its  subsidiaries,
         except as otherwise expressly provided in this Agreement;

                  (c) authorize,  recommend, propose or announce an intention to
         authorize,  recommend  or  propose,  or  enter  into any  agreement  in
         principle or an agreement  with respect to, any plan of  liquidation or
         dissolution;

                  (d) take or cause to be  taken,  whether  before  or after the
         Effective  Time,  any  action  that  would  disqualify  the Merger as a
         "reorganization" within the meaning of



<PAGE>


                                      -42-


         Section 368(a) of the Code; or

                  (e)  agree to do any of the foregoing.

         7.3.  Permitted  Conduct  of  the  Company.   Notwithstanding  anything
contained  in Section 7.1,  this  Agreement  shall not  restrict  the  Company's
ability  to (i)  consummate  the  Pending  Transactions  or take any  action  in
furtherance  thereof or (ii) sell,  assign or  transfer  its  interest in Shared
Technologies Cellular, Inc.


                                  ARTICLE VIII

                            COVENANTS AND AGREEMENTS


         8.1.  Preparation  of the  Form  S-4 and  the  Joint  Proxy  Statement;
Stockholders Meetings.

                  (a)  As  soon  as  practicable  following  the  date  of  this
Agreement,  the Company  and  Acquiror  shall  prepare and file with the SEC the
Joint Proxy  Statement and Acquiror  thereafter  shall prepare and file with the
SEC the Form S-4,  in which the Joint  Proxy  Statement  will be  included  as a
prospectus.  Each of the Company and Acquiror  shall use their  respective  best
efforts to have the Form S-4  declared  effective  under the  Securities  Act as
promptly as practicable after such filing. The Company will use all best efforts
to cause the Joint Proxy  Statement to be mailed to the Company's  stockholders,
and Acquiror will use all best efforts to cause the Joint Proxy  Statement to be
mailed to Acquiror's  stockholders in each case as promptly as practicable after
the Form S-4 is declared effective under the Securities Act. Acquiror shall also
take any action required to be taken under any applicable  state securities laws
in  connection  with the  issuance of Acquiror  Common  Stock in the Merger.  No
filing  of, or  amendment  or  supplement  to,  the Form S-4 or the Joint  Proxy
Statement will be made by Acquiror without providing the Company the opportunity
to review and comment thereon.  Acquiror will advise the Company, promptly after
it receives notice thereof,  of the time when the Form S-4 has become  effective
or any  supplement or amendment has been filed,  the issuance of any stop order,
the  suspension of the  qualification  of the Acquiror  Common Stock issuable in
connection  with the Merger for  offering  or sale in any  jurisdiction,  or any
request by the SEC for amendment of the Joint Proxy Statement or the Form S-4 or
comments thereon and responses thereto or requests by the SEC for additional



<PAGE>


                                      -43-


information. If at any time prior to the Effective Time any information relating
to the Company or Acquiror, or any of their respective  affiliates,  officers or
directors,  should be discovered by the Company or Acquiror  which should be set
forth in an  amendment or  supplement  to any of the Form S-4 or the Joint Proxy
Statement, so that any of such documents would not include any misstatement of a
material  fact or  omit  to  state  any  material  fact  necessary  to make  the
statements  therein,  in light of the circumstances  under which they were made,
not misleading, the party which discovers such information shall promptly notify
the other parties hereto and an appropriate  amendment or supplement  describing
such  information  shall be  promptly  filed  with the SEC  and,  to the  extent
required by law, disseminated to the stockholders of the Company and Acquiror.

                  (b) The Company shall,  as soon as  practicable  following the
date of this Agreement, duly call, give notice of, convene and hold a meeting of
its  stockholders  (the  "Company  Stockholder  Meeting")  for  the  purpose  of
obtaining the approval (the "Company Stockholder Approval") of a majority of the
stockholders  of the Company of this  Agreement and shall,  through its Board of
Directors,  recommend  to its  stockholders  the  approval  and adoption of this
Agreement, the Merger and the other transactions  contemplated hereby, and shall
use all commercially reasonable efforts to solicit from its stockholders proxies
in favor of approval and adoption of this  Agreement;  provided,  however,  that
such recommendation is subject to any action required by the fiduciary duties of
the Board of Directors.

                  (c) Acquiror shall, as soon as practicable  following the date
of this Agreement,  duly call, give notice of, convene and hold a meeting of its
stockholders (the "Acquiror  Stockholder  Meeting") for the purpose of obtaining
the  approval  (the  "Acquiror  Stockholder  Approval")  of a  majority  of  the
stockholders  of  Acquiror  of an increase  in the  authorized  common  stock of
Acquiror,  the issuance of the  Acquiror  Common  Stock in  connection  with the
Merger (the "Issuance") and shall, through its Board of Directors,  recommend to
its  stockholders the approval and adoption of this Agreement,  the Merger,  the
Issuance  and the  other  transactions  contemplated  hereby,  and shall use all
commercially  reasonable  efforts to solicit  from its  stockholders  proxies in
favor of approval and adoption of this Agreement.

                  (d) Acquiror and the Company will use best efforts to hold the
Company  Stockholder  Meeting and the Acquiror  Stockholder  Meeting on the same
date and as soon as practicable



<PAGE>


                                      -44-


after the date hereof.

         8.2. Letters of the Company's Accountants.

                  (a) The  Company  shall  use its best  efforts  to cause to be
delivered to Acquiror two letters from the  Company's  independent  accountants,
one dated the date of  effectiveness of Form S-4 and one dated the Closing Date,
each addressed to Acquiror,  in form and substance  reasonably  satisfactory  to
Acquiror and customary in scope and substance for comfort  letters  delivered by
independent  public  accountants  in  connection  with  registration  statements
similar to the Form S-4.

                  (b) The  Company  shall  use its best  efforts  to cause to be
delivered  to  Acquiror  a letter  from the  Company's  independent  accountants
addressed to the Company and  Acquiror,  dated as of the Closing  Date,  stating
that the Merger will qualify as a pooling of interests transaction under Opinion
16 of the Accounting Principles Board and applicable SEC rules and regulations.

         8.3. Letters of Acquiror's Accountants.

                  (a)  Acquiror  shall  use its  best  efforts  to  cause  to be
delivered to the Company two letters from  Acquiror's  independent  accountants,
one dated the date of  effectiveness of Form S-4 and one dated the Closing Date,
each addressed to the Company, in form and substance reasonably  satisfactory to
the Company and customary in scope and substance for comfort  letters  delivered
by independent  public  accountants in connection with  registration  statements
similar to the Form S-4.

                  (b)  Acquiror  shall  use its  best  efforts  to  cause  to be
delivered  to the  Company a letter  from  Acquiror's  independent  accountants,
addressed to the Company and  Acquiror,  dated as of the Closing  Date,  stating
that the Merger will qualify as a pooling of interests transaction under Opinion
16 of  the Accounting Principles Board and applicable SEC rules and regulations.



<PAGE>


                                      -45-


         8.4. Additional Agreements; Cooperation.

                  (a) Subject to the terms and conditions herein provided,  each
of the parties  hereto  agrees to use its best  efforts to take,  or cause to be
taken, all action and to do, or cause to be done, all things  necessary,  proper
or advisable to consummate  and make  effective as promptly as  practicable  the
transactions contemplated by this Agreement, and to cooperate with each other in
connection  with the foregoing,  including  using its best efforts (i) to obtain
all  necessary  waivers,  consents and  approvals  from  other  parties to  loan
agreements,  material leases and other material  contracts that are specified on
Schedule 8.4 to the Disclosure Statement, (ii) to obtain all necessary consents,
approvals and  authorizations  as are required to be obtained under any federal,
state or foreign law or regulations, (iii) to defend all lawsuits or other legal
proceedings  challenging  this Agreement or the consummation of the transactions
contemplated hereby, (iv) to lift or rescind any injunction or restraining order
or other order adversely  affecting the ability of the parties to consummate the
transactions  contemplated hereby, (v) to effect all necessary registrations and
filings,  including,  but  not  limited  to,  filings  under  the  HSR  Act  and
submissions of information requested by governmental  authorities,  (vi) provide
all  necessary  information  for the Joint Proxy  Statement and the Form S-4 and
(vii) to fulfill all conditions to this Agreement.

                  (b) Each of the parties  hereto agrees to furnish to the other
party hereto such necessary  information and reasonable assistance as such other
party may request in connection  with its  preparation  of necessary  filings or
submissions to any regulatory or  governmental  agency or authority,  including,
without limitation,  any filing necessary under the provisions of the HSR Act or
any other  applicable  Federal or state  statute.  At any time upon the  written
request of Acquiror,  the Company shall advise  Acquiror of the number of shares
of Company Common Stock outstanding on such date.

         8.5. Publicity.  The Company,  Acquiror and Merger Sub agree to consult
with each other in issuing  any press  release  and with  respect to the general
content of other public statements with respect to the transactions contemplated
hereby,  and shall not issue any such press release prior to such  consultation,
except as may be required by law.

         8.6. No  Solicitation.  (a) The Company  shall not, nor shall it permit
any of its  subsidiaries  to,  nor  shall  it  authorize  or  permit  any of its
officers, directors or employees



<PAGE>


                                      -46-


or any  investment  banker,  financial  advisor,  attorney,  accountant or other
representative  retained  by it or any  of  its  subsidiaries  to,  directly  or
indirectly,  (i) solicit any Company Takeover Proposal (as hereinafter  defined)
or (ii)  participate in any  discussions or  negotiations  regarding any Company
Takeover  Proposal;  provided,  however,  that if, at any time  prior to Company
Stockholders  Meeting,  the Board of Directors of the Company determines in good
faith, after consultation with outside counsel, that it is necessary to do so in
order to comply with its fiduciary  duties to the Company's  stockholders  under
applicable law, the Company may, in response to a Company Takeover Proposal that
was not solicited,  and subject to compliance with Section  8.6(c),  (x) furnish
information  with  respect to the Company to any person  pursuant to a customary
confidentiality  agreement (as determined by the Company after consultation with
its outside counsel) and (y) participate in negotiations  regarding such Company
Takeover  Proposal.  Without  limiting the foregoing,  it is understood that any
violation  of the  restrictions  set  forth  in the  preceding  sentence  by any
director or executive officer of the Company or any of its subsidiaries, whether
or not such person is  purporting  to act on behalf of the Company or any of its
subsidiaries or otherwise, shall be deemed to be a breach of this Section 8.6(a)
by the Company.  For purposes of this  Agreement,  "Company  Takeover  Proposal"
means any inquiry,  proposal or offer from any person  relating to any direct or
indirect  acquisition or purchase of 20% or more of the assets of the Company or
its subsidiaries or 20% or more of any class of equity securities of the Company
or  any of its  subsidiaries,  any  tender  offer  or  exchange  offer  that  if
consummated  would result in any person  beneficially  owning 20% or more of any
class of  equity  securities  of the  Company  or any of its  subsidiaries,  any
merger,  consolidation,  business  combination,  recapitalization,  liquidation,
dissolution  or  similar  transaction  involving  the  Company  or  any  of  its
subsidiaries, other than the transactions contemplated by this Agreement, or any
other  transaction  the  consummation  of which would  reasonably be expected to
impede,  interfere with,  prevent or materially  delay the Merger or which would
reasonably  be expected  to dilute  materially  the  benefits to Acquiror of the
transactions contemplated by this Agreement.

                  (b) Except as set forth in this Section 8.6, neither the Board
of  Directors  of the Company nor any  committee  thereof  shall (i) withdraw or
modify,  or propose  publicly  to  withdraw  or modify,  in a manner  adverse to
Acquiror,  the  approval or  recommendation  by such Board of  Directors or such
committee of the Merger or this Agreement, (ii) approve or recommend, or



<PAGE>


                                      -47-


propose publicly to approve or recommend, any Company Takeover Proposal or (iii)
cause the Company to enter into any letter of intent,  agreement  in  principle,
acquisition  agreement or other similar agreement (each, a "Company  Acquisition
Agreement")  related  to any  Company  Takeover  Proposal.  Notwithstanding  the
foregoing, in the event that prior to the Company Stockholders Meeting the Board
of Directors of the Company  determines in good faith,  after  consultation with
outside  counsel,  that it is  necessary  to do so in order to  comply  with its
fiduciary duties to the Company's  stockholders  under applicable law, the Board
of Directors of the Company may  (subject to this and the  following  sentences)
(x)  withdraw or modify its  approval or  recommendation  of the Merger and this
Agreement  or (y) approve or recommend a Company  Superior  Proposal (as defined
below)  or  terminate  this  Agreement  (and  concurrently  with or  after  such
termination,  if it so  chooses,  cause the  Company to enter  into any  Company
Acquisition  Agreement with respect to any Company  Superior  Proposal),  but in
each of the cases set forth in this clause (y), no action  shall be taken by the
Company pursuant to clause (y) until a time that is after the fifth business day
following  Acquiror's  receipt of written  notice  advising  Acquiror that the
Board of  Directors  of the Company has  received a Company  Superior  Proposal,
specifying the material terms and conditions of such Company  Superior  Proposal
and identifying the person making such Company Superior Proposal,  to the extent
such  identification  of the person  making  such  proposal  does not breach the
fiduciary  duties of the Board of Directors as advised by outside legal counsel.
For purposes of this  Agreement,  a "Company  Superior  Proposal" means any bona
fide  proposal  made by a third party to acquire,  directly or  indirectly,  for
consideration  consisting  of  cash  and/or  securities,  more  than  50% of the
combined  voting  power of the  shares  of  Company  Common  Stock  and  Company
Preferred Stock then outstanding or all or  substantially  all the assets of the
Company  and  otherwise  on terms  that the Board of  Directors  of the  Company
determines  in its good  faith  judgment  (based on the  advice  of a  financial
advisor  of  nationally  recognized  reputation)  to be  more  favorable  to the
Company's stockholders than the Merger.

                  (c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 8.6, the Company shall immediately advise
Acquiror  orally and in writing of any request for information or of any Company
Takeover Proposal,  the material terms and conditions of such request or Company
Takeover  Proposal,  and to the extent  such  disclosure  is not a breach of the
fiduciary  duties of the Board of Directors as advised by outside legal counsel,
the identity of the person making such request or Company Takeover Proposal.



<PAGE>


                                      -48-


                  (d) Nothing  contained in this Section 8.6 shall  prohibit the
Company from taking and disclosing to its  stockholders a position  contemplated
by Rule  14e-2(a)  promulgated  under  the  Exchange  Act,  or from  making  any
disclosure to the Company's  stockholders  if, in the good faith judgment of the
Board of Directors  of the Company,  after  consultation  with outside  counsel,
failure so to disclose would be  inconsistent  with its fiduciary  duties to the
Company's  stockholders  under applicable law;  provided,  however,  neither the
Company nor its Board of Directors nor any committee  thereof  shall,  except as
permitted by Section 8.6(b), withdraw or modify, or propose publicly to withdraw
or modify,  its position with respect to this Agreement or the Merger or approve
or recommend,  or propose  publicly to approve or recommend,  a Company Takeover
Proposal.

         8.7. Access to Information.

                  (a) From the date of this Agreement  until the Effective Time,
each of the Company and  Acquiror  will give the other party and its  authorized
representatives   (including  counsel,   environmental  and  other  consultants,
accountants  and  auditors)  full access  during  normal  business  hours to all
facilities,  personnel and operations and to all books and records of it and its
subsidiaries,  will  permit the other party to make such  inspections  as it may
reasonably  require and will cause its officers and those of its subsidiaries to
furnish  the  other  party  with such  financial  and  operating  data and other
information  with respect to its business and  properties as such party may from
time to time reasonably request.

                  (b) Each of the  parties  hereto  will hold and will cause its
consultants  and  advisors  to  hold  in  strict  confidence  on the  terms  and
conditions  set  forth in the  Confidentiality  Agreement  dated  July 11,  1997
between Acquiror and the Company (the "Confidentiality Agreement") all documents
and  information  furnished  to the other in  connection  with the  transactions
contemplated  by this  Agreement  as if  each of the  parties  hereto  and  such
consultant or advisor was a party thereto,  and this provision shall survive any
termination of this Agreement.

         8.8.  Notification of Certain Matters. The Company or Acquiror,  as the
case may be,  shall  promptly  notify the other of (i) its  obtaining  of actual
knowledge as to the matters set forth in clauses (x) and (y) below,  or (ii) the
occurrence,  or failure to occur, of any event,  which  occurrence or failure to
occur would be likely to cause (x) any representation or warranty  contained  in
this Agreement to be untrue or



<PAGE>


                                      -49-


inaccurate  in any  material  respect  at any time  from the date  hereof to the
Effective Time, or (y) any material  failure of the Company or Acquiror,  as the
case may be, or of any officer,  director,  employee or agent thereof, to comply
with or satisfy any  covenant,  condition or  agreement  to be complied  with or
satisfied  by  it  under  this  Agreement;   provided,  however,  that  no  such
notification  shall affect the  representations  or warranties of the parties or
the conditions to the obligations of the parties hereunder.

         8.9.  Resignation of Directors.  At or prior to the Effective Time, the
Company shall take all  commercially  reasonable  efforts to deliver to Acquiror
the  resignations  of such  directors  of its  Subsidiaries  as  Acquiror  shall
specify, effective at the Effective Time.

         8.10. Indemnification.

                  (a) As of the date of this  Agreement  and for a period of six
years following the Effective Time of the Merger, the Surviving Corporation will
indemnify  and hold  harmless any persons who were  directors or officers of the
Company or a subsidiary of the Company prior to the Effective Time of the Merger
(the  "Indemnified  Persons") to the fullest  extent such person could have been
indemnified  under the DGCL or under the Certificate of Incorporation or By-Laws
of the Company or the certificate of  incorporation or by-laws of any subsidiary
of the Company in effect  immediately prior to the Effective Time of the Merger,
with respect to any act or failure to act by any such  Indemnified  Person prior
to the Effective Time of the Merger.

                  (b) Any  determination  required  to be made with  respect  to
whether an Indemnified  Person's  conduct  complies with the standards set forth
under the DGCL or other  applicable  corporate law shall be made by  independent
counsel  selected by the  Indemnified  Persons and reasonably  acceptable to the
Surviving  Corporation.  The Surviving Corporation shall pay such counsel's fees
and expenses (it being agreed that neither the Indemnified Persons, Acquiror nor
the  Surviving  Corporation  shall  challenge  any  such  determination  by such
independent counsel).

                  (c) The provisions of this Section 8.10 are for the benefit of
the Indemnified  Persons, any of whom shall have all rights at law and in equity
to enforce the rights hereunder.

                  (d)  In the event that the Surviving Corporation or



<PAGE>


                                      -50-


any of its successors or assigns (i) consolidates  with or merges into any other
person,  the  Surviving  Corporation  or such  successor  or  assign  is not the
continuing or surviving  corporation or entity of such  consolidation or merger,
or (ii) transfers all or  substantially  all of its properties and assets to any
person,  then,  and in each case,  proper  provision  shall be made so that such
person or the continuing or surviving  corporation  assumes the  obligations set
forth in this Section 8.10.

                  (e) Acquiror shall cause the Surviving Corporation to maintain
in effect  for not less than five  years  from the  Effective  Time the  current
polices of  directors'  and  officers'  liability  insurance  maintained  by the
Company and its  subsidiaries  (provided that Acquiror may  substitute  therefor
policies of at least the same coverage containing terms and conditions which are
no less advantageous to the Indemnified Parties in all material respects so long
as no lapse in coverage occurs as a result of such substitution) with respect to
all matters, including the transactions contemplated hereby, occurring prior to,
and including the Effective Time,  provided that, in the event that any Claim is
asserted or made within such five year period, such insurance shall be continued
in respect of any such Claim until final disposition of any and all such Claims,
provided,  further,  that Acquiror shall not be obligated to make annual premium
payments  for such  insurance  to the extent  such  premiums  exceed 200% of the
premiums paid as of the date hereof by the Company for such insurance.

         8.11. Fees and Expenses. Whether or not the Merger is consummated,  the
Company and Acquiror shall bear their respective expenses incurred in connection
with the Merger, including,  without limitation, the preparation,  execution and
performance of this Agreement and the transactions  contemplated hereby, and all
fees  and   expenses  of   investment   bankers,   finders,   brokers,   agents,
representatives,  counsel and accountants,  except that each of Acquiror and the
Company  shall  bear and pay  one-half  of the costs and  expenses  incurred  in
connection  with (1) the  filing,  printing  and mailing of the Form S-4 and the
Joint Proxy  Statement  (including  SEC filing  fees) and (2) the filings of the
premerger  notification  and report  forms under the HSR Act  (including  filing
fees).

         8.12.  Affiliates.  As soon as practicable  after the date hereof,  the
Company shall deliver to Acquiror a letter  identifying  all persons who are, at
the time this  Agreement is submitted  for adoption by the  stockholders  of the
Company,  "affiliates"  of the  Company  for  purposes  of Rule  145  under  the
Securities Act or for purposes of qualifying the Merger for



<PAGE>


                                      -51-


pooling of interests  accounting  treatment  under Opinion 16 of the  Accounting
Principles Board and applicable SEC rules and regulations. The Company shall use
its  reasonable  efforts to cause each such  person to deliver to Acquiror as of
the Closing  Date, a written  agreement  substantially  in the form  attached as
Exhibit A hereto. Acquiror shall use its reasonable efforts to cause all persons
who are  "affiliates"  of Acquiror  for  purposes of  qualifying  the Merger for
pooling of interests  accounting  treatment  under Opinion 16 of the  Accounting
Principles  Board and  applicable  SEC rules and  regulations to comply with the
fourth paragraph of Exhibit A hereto.

         8.13. NASDAQ Listing. Acquiror shall use its reasonable best efforts to
cause the Acquiror Common Stock to be issued in connection with the Merger to be
approved  for listing on NASDAQ,  subject to  official  notice of  issuance,  as
promptly as  practicable  after the date  hereof,  and in any event prior to the
Closing Date.

         8.14.  Stockholder  Litigation.  Each of the Company and Acquiror shall
give the other the  reasonable  opportunity to participate in the defense of any
stockholder  litigation  against or in the name of the Company or  Acquiror,  as
applicable,  and/or  their  respective  directors  relating to the  transactions
contemplated by this Agreement.

         8.15.  Tax  Treatment.  Each of Acquiror and the Company  shall use its
respective best efforts (including,  without limitation,  providing  information
and  providing  for itself and  obtaining  from its  affiliates  reasonable  and
necessary  representations  and  covenants in  connection  with the tax opinions
required by Article IX) and Acquiror  shall cause the Surviving  Corporation  to
use its best  efforts to cause the Merger to qualify as a  reorganization  under
the provisions of Section 368(a) of the Code and shall treat the Merger as a tax
free reorganization on its tax returns.

         8.16. Pooling of Interests.  Each of the Company and Acquiror shall use
its  respective  best  efforts to cause the  transactions  contemplated  by this
Agreement to be accounted for as a pooling of interests  under Opinion 16 of the
Accounting  Principles Board and applicable SEC rules and regulations,  and such
accounting  treatment  to be accepted by each of the  Company's  and  Acquiror's
independent certified public accountants,  respectively, and each of the Company
and Acquiror agrees that it shall voluntarily take no action (including, without
limitation,  any  action by the  Company  with  respect  to Shared  Technologies
Cellular, Inc.) that would cause such accounting treat-



<PAGE>


                                      -52-


ment not to be obtained.

         8.17. Fairness Opinion.  Each of the Acquiror and the Company shall use
their  respective  best  efforts  to  cause  to be  delivered  to each of  their
respective  stockholders  a fairness  opinion  dated the date of the Joint Proxy
Statement.


                                   ARTICLE IX

                              CONDITIONS TO CLOSING


         9.1.  Conditions to Each Party's  Obligation to Effect the Merger.  The
respective  obligation  of each  party to effect  the  Merger is  subject to the
satisfaction  or  waiver  on or  prior  to the  Closing  Date  of the  following
conditions:

                  (a)  Stockholder  Approvals.  Each of the Company  Stockholder
         Approval  and  the  Acquiror   Stockholder  Approval  shall  have  been
         obtained.

                  (b) HSR Act. The waiting  period (and any  extension  thereof)
         applicable  to the Merger under the HSR Act shall have been  terminated
         or shall have expired.

                  (c) No Injunctions or Restraints.  No judgment, order, decree,
         statute,   law,  ordinance,   rule  or  regulation  entered,   enacted,
         promulgated,  enforced  or issued  by any  court or other  governmental
         entity  of  competent   jurisdiction   or  other  legal   restraint  or
         prohibition (collectively,  "Restraints") shall be in effect preventing
         the consummation of the Merger.

                  (d)  Governmental  Action.  No action or  proceeding  shall be
         instituted   by  any   governmental   authority   seeking   to  prevent
         consummation  of the Merger or seeking  material  damages in connection
         with  the  transactions  contemplated  hereby  which  continues  to  be
         outstanding.

                  (e) Form S-4. The Form S-4 shall have become  effective  under
         the  Securities  Act and shall not be the  subject of any stop order or
         proceedings  seeking  a  stop  order  and  no  stop  order  or  similar
         restraining  order  shall be  threatened  or  entered by the SEC or any
         state securities administration preventing the Merger.

                  (f)  NASDAQ Listing.  The shares of Acquiror Common



<PAGE>


                                      -53-


         Stock issuable to the Company's  stockholders  as  contemplated by this
         Agreement  shall have been  approved for listing on NASDAQ,  subject to
         official notice of issuance.

                  (g)  Pooling  Letters.  The Company  and  Acquiror  shall have
         received a letter from the Acquiror's independent accountants, dated as
         of the Closing Date, addressed to the Company and Acquiror,  stating in
         substance  that the  Merger  will  qualify  as a pooling  of  interests
         transaction  under Opinion 16 of the  Accounting  Principles  Board and
         applicable SEC rules and regulations.

                  (h) Bank  Credit  Facility.  The  lenders  under the  existing
         credit  facility  of the Company  shall have  delivered  their  written
         consent to the Merger and the transactions contemplated hereby or a new
         credit facility shall have been entered into and the existing  facility
         terminated.

         9.2. Conditions to Obligations of Acquiror.  The obligation of Acquiror
to effect  the  Merger  is  further  subject  to  satisfaction  or waiver of the
following conditions:

                  (a)  Representations  and Warranties.  The representations and
         warranties  of the Company set forth  herein  shall be true and correct
         both when made and at and as of the Closing  Date, as if made at and as
         of such time  (except  to the  extent  expressly  made as of an earlier
         date, in which case as of such date),  except where the failure of such
         representations  and  warranties  to be so true  and  correct  (without
         giving  effect  to any  limitation  as to  "materiality"  or  "material
         adverse  effect" set forth therein) does not have, and is not likely to
         have,  individually  or in the aggregate,  a Company  Material  Adverse
         Effect.

                  (b)  Performance of  Obligations  of the Company.  The Company
         shall have performed in all material respects all obligations  required
         to be performed  by it under this  Agreement at or prior to the Closing
         Date.

                  (c) No Material Adverse Change. At any time after December 31,
         1996,  there shall not have occurred any material adverse change in the
         general affairs, management,  business,  operations,  assets, condition
         (financial   or   otherwise)  or  prospects  of  the  Company  and  its
         subsidiaries, taken as a whole.

                  (d)  Affiliate Letters.  Acquiror shall have received



<PAGE>


                                      -54-


         a written  agreement  substantially  in the form  attached as Exhibit A
         hereto from each of the persons specified pursuant to Section 8.12.

                  (e)  Governmental   Consents.   All  necessary   consents  and
         approvals of any federal,  state or local governmental authority or any
         other third party  required for the  consummation  of the  transactions
         contemplated by this Agreement shall have been obtained except for such
         consents and approvals the failure to obtain which  individually  or in
         the aggregate would not have a material adverse effect on the Surviving
         Corporation.

                  (f) Tax Opinion.  Acquiror  shall have  received an opinion of
         Arnold & Porter, in form and substance  reasonably  satisfactory to it,
         to the effect that the Merger will qualify as a  reorganization  within
         the meaning of Section 368(a) of the Code. In rendering  such  opinion,
         such counsel may receive and rely on  representations of fact contained
         in certificates provided by Acquiror and the Company.

         9.3.  Conditions to Obligations  of the Company.  The obligation of the
Company to effect the Merger is further subject to satisfaction or waiver of the
following conditions:

                  (a)  Representations  and Warranties.  The representations and
         warranties  of Acquiror  and Merger Sub set forth  herein shall be true
         and  correct  both when made and at and as of the Closing  Date,  as if
         made at and as of such time (except to the extent  expressly made as of
         an earlier  date,  in which  case as of such  date),  except  where the
         failure  of such  representations  and  warranties  to be so  true  and
         correct (without giving effect to any limitation as to "materiality" or
         "material  adverse effect" set forth therein) does not have, and is not
         likely to have,  individually or in the aggregate, an Acquiror Material
         Adverse Effect.

                  (b)  Performance  of  Obligations  of Acquiror and Merger Sub.
         Acquiror and Merger Sub shall have  performed in all material  respects
         all  obligations  required to be performed by them under this Agreement
         at or prior to the Closing Date.

                  (c) Senior Subordinated Notes.  Acquiror shall have obtained a
         standby  underwriting  commitment  to  enable  it to make an  offer  to
         purchase the 12 1/4% Senior Subordinated



<PAGE>


                                      -55-


         Notes due 2006 of Shared Technologies  Fairchild  Communications  Corp.
         pursuant to the indenture governing such notes.

                  (d) Tax Opinion. The Company shall have received an opinion of
         Cahill Gordon & Reindel, in form and substance reasonably  satisfactory
         to it, to the effect that the Merger will  qualify as a  reorganization
         within the meaning of Section  368(a) of the Code.  In  rendering  such
         opinion,  such counsel may receive and rely on  representations of fact
         contained in certificates provided by Acquiror and the Company.


                                    ARTICLE X

                                   TERMINATION


         10.1.  Termination.  This Agreement may be terminated at any time prior
to the Effective Time, whether before or after and approval of this Agreement by
either the Company's stockholders or the Acquiror's stockholders:

                  (a) by mutual written consent of the Company and Acquiror;

                  (b)  by either the Company or Acquiror;

                            (i) if the Merger shall not have been consummated by
                  December  15, 1997 unless the Merger has not  occurred by such
                  time solely by reason of the failure by the SEC to give timely
                  approval  to the Joint Proxy  Statement  or the Form S-4 or by
                  reason of the conditions set forth in Section 9.1(b) or 9.2(e)
                  having not yet been satisfied,  in which case January 15, 1997
                  if  consented  to by  the  Company  (such  consent  not  to be
                  unreasonably withheld);  provided,  however, that the right to
                  terminate this Agreement  pursuant to this Section  10.1(b)(i)
                  shall not be available  to any party whose  failure to perform
                  any of its  obligations  under this  Agreement  results in the
                  failure of the Merger to be consummated by such time;

                           (ii) if the Acquiror  Stockholder  Approval shall not
                  have been  obtained at an Acquiror  Stockholder  Meeting  duly
                  convened  therefor  or  at  any  adjournment  or  postponement
                  thereof;



<PAGE>


                                      -56-


                          (iii) if the Company  Stockholder  Approval  shall not
                  have been  obtained  at a  Company  Stockholder  Meeting  duly
                  convened  therefor  or  at  any  adjournment  or  postponement
                  thereof; or

                           (iv)     if any Restraint having any of the effects
                  set forth in Section 9.1(c) shall be in effect and
                  shall have become final and nonappealable;

                  (c) by the Company,  if Acquiror shall have breached or failed
         to  perform  in  any  material  respect  any  of  its  representations,
         warranties, covenants or other agreements contained in this Agreement;

                  (d) by the  Company if the Closing  Date Market  Price is less
         than $10.00;

                  (e) by the Company if the Form S-4 is not  declared  effective
         by November 20, 1997 (it being understood that the Acquiror may request
         the Company to consent to the  extension  of such date to December  20,
         1997 (such consent not to be unreasonably withheld));

                  (f) by Acquiror,  if the Company shall have breached or failed
         to  perform  in  any  material  respect  any  of  its  representations,
         warranties,  covenants  or other  agreements  (other than  Section 8.6)
         contained in this Agreement;

                  (g) by the Company if the average  closing price for shares of
         Acquiror  Common  Stock as  reported on the NASDAQ for any period of 20
         consecutive  trading  days  after the date  hereof is less than $10 per
         share;

                  (h) by  Acquiror,  if  Section  8.6 shall be  breached  by the
         Company  or  any  of  its  officers,  directors  or  employees  or  any
         investment  banker,  financial advisor,  attorney,  accountant or other
         representative of the Company,  in any material respect and the Company
         shall have failed  promptly to terminate  the  activity  giving rise to
         such  breach  and use best  efforts  to cure such  breach  upon  notice
         thereof  from  Acquiror,  or the Company  shall  breach  Section 8.6 by
         failing to promptly notify Acquiror as required thereunder;

                  (i) by Acquiror if (i) the Board of  Directors  of the Company
         or any committee  thereof shall have  withdrawn or modified in a manner
         adverse to Acquiror  its  approval or  recommendation  of the Merger or
         this Agreement, or failed



<PAGE>


                                      -57-


         to reconfirm its  recommendation  within fifteen  business days after a
         written  request  to do so, or  approved  or  recommended  any  Company
         Takeover  Proposal or (ii) the Board of Directors of the Company or any
         committee  thereof  shall have  resolved  to take any of the  foregoing
         actions; or

                  (j) by the Company if it elects to terminate this Agreement in
         accordance with Section 8.6(b);  provided that it has complied with all
         provisions thereof,  including the notice provisions therein,  and that
         it  complies  with  applicable  requirements  relating  to the  payment
         (including the timing of any payment) of the  termination  fee required
         by Section 10.2(b).

         10.2. Effect of Termination.

                  (a) The termination of this Agreement  shall become  effective
upon delivery to the other party of written notice thereof.  In the event of the
termination  of this  Agreement  pursuant to the  foregoing  provisions  of this
Article  X,  this  Agreement  shall  become  void  and have no  effect,  with no
liability on the part of any party  (except as provided in paragraph  (b) below)
or its  stockholders  or  directors  or officers in respect  thereof  except for
agreements  which  survive   the  termination of this  Agreement  and except for
liability  that Acquiror or the Company might have arising from a breach of this
Agreement.

                  (b) In the event of a  termination  of this  Agreement  by the
Company pursuant to Section 10.1(j),  then the Company shall within two business
days of such termination pay Acquiror by wire transfer of immediately  available
funds to an account  specified by Acquiror a termination  fee of $15.0  million,
which includes reimbursement for expenses.


                                   ARTICLE XI

                                  MISCELLANEOUS


         11.1.  Nonsurvival  of  Representations  and  Warranties.  None  of the
representations and warranties in this Agreement or in any instrument  delivered
pursuant to this Agreement  shall survive the Effective  Time. This Section 11.1
shall not limit any  covenant or  agreement  of the  parties  which by its terms
contemplates performance after the Effective Time.



<PAGE>


                                      -58-


         11.2. Closing and Waiver.

                  (a)  Unless  this  Agreement  shall  have been  terminated  in
accordance with the provisions of Section 10.1 hereof,  a closing (the "Closing"
and the date and time thereof being the "Closing  Date") will be held as soon as
practicable  after the  conditions  set forth in Sections 9.1, 9.2 and 9.3 shall
have been satisfied or waived. The Closing will be held at the offices of Cahill
Gordon & Reindel,  80 Pine Street, New York, New York or at such other places as
the parties may agree.  Simultaneously therewith, the Certificate of Merger will
be filed.

                  (b) At any time prior to the Effective  Date, any party hereto
may (i) extend the time for the  performance of any of the  obligations or other
acts  of  any  other  party  hereto,   (ii)  waive  any   inaccuracies   in  the
representations  and  warranties of the other party  contained  herein or in any
document  delivered  pursuant hereto, and (iii) waive compliance with any of the
agreements  of any other  party or with any  conditions  to its own  obligations
contained  herein.  Any  agreement  on the  part of a party  hereto  to any such
extension or waiver shall be valid only if set forth in an instrument in writing
duly authorized by and signed on behalf of such party.

         11.3. Notices.

                  (a) Any notice or  communication  to any party hereto shall be
duly given if in writing and  delivered  in person or mailed by first class mail
(registered or certified, return receipt requested),  facsimile or overnight air
courier guaranteeing next day delivery, to such other party's address.

                  If to Acquiror or Merger Sub:

                           6805 Route 202
                           New Hope, Pennsylvania  18938
                           Facsimile No.:  (215) 862-1083
                           Attention:  Chief Executive Officer

                           with a copy to:

                           Arnold & Porter
                           399 Park Avenue
                           New York, New York  10022
                           Facsimile No.:  (212) 713-1399
                           Attention:  Jonathan C. Stapleton



<PAGE>


                                      -59-


                           and

                           Aloysius T. Lawn, IV, Esq.
                           General Counsel
                           Tel-Sav Holdings, Inc.
                           6805 Route 202
                           New Hope, Pennsylvania  18938
                           Facsimile No.:  (215) 862-1083

                  If to the Company:

                           100 Great Meadow Road, Suite 104
                           Wethersfield, CT  06109
                           Facsimile No.:  (860) 258-2455
                           Attention:  Kenneth M. Dorros, Esq.

                           with a copy to:

                           James J. Clark, Esq.
                           Cahill Gordon & Reindel
                           80 Pine Street
                           New York, NY  10005
                           Facsimile No.:  (212) 269-5420

                                         and

                           Donald E. Miller, Esq.
                           The Fairchild Corporation
                           300 West Service Road
                           P.O. Box 10803
                           Chantilly, Virginia  22021-0803
                           Facsimile No.:  (703) 478-5775

                  (b) All notices and communications will be deemed to have been
duly  given:  at the time  delivered  by hand,  if  personally  delivered;  five
business days after being  deposited in the mail, if mailed;  when sent, if sent
by facsimile; and the next business day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery.

         11.4.  Counterparts.  This  Agreement  may be  executed  in two or more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

         11.5. Interpretation.  The headings of articles and sections herein are
for convenience of reference,  do not constitute a part of this  Agreement,  and
shall not be deemed to



<PAGE>


                                      -60-


limit  or  affect  any of the  provisions  hereof.  As used  in this  Agreement,
"person"  means any  individual,  corporation,  limited or general  partnership,
joint  venture,   association,   joint  stock  company,  trust,   unincorporated
organization  or  government  or any agency or  political  subdivision  thereof;
"subsidiary"  of  any  person  means  (i) a  corporation  more  than  50% of the
outstanding  voting  stock of which is owned,  directly or  indirectly,  by such
person or by one or more other subsidiaries of such person or by such person and
one or more  subsidiaries  thereof  or  (ii)  any  other  person  (other  than a
corporation)  in which such person,  or one or more other  subsidiaries  of such
person or such person and one or more other  subsidiaries  thereof,  directly or
indirectly,  have at least a majority ownership and voting power relating to the
policies, management and affairs thereof; and "voting stock" of any person means
capital stock of such person which  ordinarily has voting power for the election
of directors (or persons performing  similar functions) of such person,  whether
at all times or only so long as no senior  class of  securities  has such voting
power by reason of any contingency.  Notwithstanding  anything contained herein,
in no event will Shared Technologies  Cellular,  Inc. be considered a subsidiary
of the Company for any purpose.

         11.6. Certain Definitions.

                  "FII" means  Fairchild  Industries,  Inc.,  the  non-surviving
constituent   corporation   in  the  merger  of  March  13,   1996  with  Shared
Technologies, Inc.

                  "FHC  Indemnification  Agreement"  means  the  Indemnification
Agreement, between Fairchild Holding Corp. and the Company dated March 13, 1996.

                  "RHI  Indemnification  Agreement"  means  the  Indemnification
Agreement dated March 13, 1996 by and among TFC, RHI and the Company.

                  "Pending   Transactions"   means  the   pending   transactions
regarding ICS Communications, Inc. and GE Capital-Rescom, L.L.P.

                  "Pledge  Agreement"  means the  Pledge  Agreement  dated as of
March 13, 1996 by RHI in favor of Gadsby & Hannah as pledge agent.

                  "STFI  Agreement"  means the  Agreement  dated the date hereof
between the Company and Acquiror.



<PAGE>


                                      -61-


         11.7.  Amendment.  This  Agreement may be amended by the parties at any
time before or after any required  approval of matters  presented in  connection
with  the  Merger  by each of the  stockholders  of the  Company  and  Acquiror;
provided,  however,  that after any such  approval,  there shall not be made any
amendment that by law requires further approval by such stockholders without the
further approval of such stockholders.  This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties.

         11.8.  No Third  Party  Beneficiaries.  Except  for the  provisions  of
Section 8.10 (which is intended to be for the benefit of the persons referred to
therein,  and may be enforced by such persons)  nothing in this Agreement  shall
confer any rights  upon any person or entity  which is not a party or  permitted
assignee of a party to this Agreement.

         11.9. Governing Law. Except as the laws of the State of Delaware are by
their terms  applicable,  this Agreement  shall be governed by, and construed in
accordance  with, the laws of the State of New York without regard to principles
of conflicts of laws.

         11.10.  Entire  Agreement.   This  Agreement   constitutes  the  entire
agreement  among the  parties  with  respect to the  subject  matter  hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.

         11.11. Validity. The invalidity or unenforceability of any provision of
this  Agreement  shall not affect the  validity or  enforceability  of any other
provisions of this Agreement, which shall remain in full force and effect.



<PAGE>


                                      -62-


         IN  WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  Merger
Agreement to be executed by their duly authorized officers all as of the day and
year first above written.

                                      TEL SAVE HOLDINGS, INC.


                                      By:/s/ Edward B. Meyercord, III
                                         --------------------------------------
                                      Name:
                                            -----------------------------------
                                      Title:
                                             -----------------------------------


                                      TSHCo, INC.


                                      By: /s/ Edward B. Meyercord, III
                                         --------------------------------------
                                      Name:
                                            -----------------------------------
                                      Title:
                                             -----------------------------------



                                      SHARED TECHNOLOGIES FAIRCHILD, INC.


                                      By: /s/ Anthony D. Autorino
                                          -------------------------------------
                                      Name:
                                            -----------------------------------
                                      Title:
                                             -----------------------------------







<PAGE>



                                                                       EXHIBIT A


                        Form of Company Affiliate Letter


[ADDRESS]


Ladies and Gentlemen:

         The  undersigned,  a holder of shares of common stock,  par value $.004
per share ("Company  Common Stock"),  of Shared  Technologies  Fairchild Inc., a
Delaware corporation (the "Company"),  is entitled to receive in connection with
the  merger  (the  "Merger")  between  the  Company  and a direct  wholly  owned
subsidiary of Tel-Save Holdings,  Inc.  ("Acquiror") shares of common stock, par
value $.01 per share,  ("Acquiror  Common Stock") of Acquiror.  The  undersigned
acknowledges  that the  undersigned  may be deemed an "affiliate" of the Company
within the meaning of Rule 145 ("Rule 145") promulgated under the Securities Act
of 1933, as amended (the "Act"),  although  nothing  contained  herein should be
construed as an admission of such fact.

         If in  fact  the  undersigned  is  an  affiliate  under  the  Act,  the
undersigned's  ability to sell,  assign or transfer  the Shares  received by the
undersigned  pursuant to the Merger may be restricted unless such transaction is
registered  under the Act or an exemption from such  registration  is available.
The undersigned understands that such exemptions are limited and the undersigned
has  obtained  advice  of  counsel  as to the  nature  and  conditions  of  such
exemptions,  including information with respect to the applicability to the sale
of such securities of Rules 144 and 145(d) promulgated under the Act.

         The undersigned  hereby  represents to and covenants with Acquiror that
the  undersigned  will not sell,  assign or transfer any of the Acquiror  Common
Stock received by the undersigned  pursuant to the Merger except (i) pursuant to
an effective registration  statement  under the Act, (ii) in conformity with the
limitations  specified  by Rules 144 and Rule  145(d) or (iii) in a  transaction
that,  in the  opinion of counsel  reasonably  satisfactory  to  Acquiror  or as
described  in a  "no-action"  or  interpretive  letter  from  the  Staff  of the
Securities and Exchange Commission (the "SEC"), is not required to be registered
under the Act.


<PAGE>


                                       -2-



         It is understood that the undersigned has no present  intention to sell
the Acquiror  Common Stock acquired by the  undersigned  pursuant to the Merger.
The undersigned agrees that the undersigned will not sell, transfer or otherwise
dispose of any Company  Common Stock for 30 days prior to the effective  date of
the Merger or any  Acquiror  Common  Stock  received by the  undersigned  in the
Merger  until  after such time as results  covering at least 30 days of combined
operations of the Company and Acquiror have been  published by Acquiror,  in the
form of a quarterly  earnings  report, a report to the SEC on Form 10-K, 10-Q or
8-K, or any other public  filing or  announcement  which  includes such combined
results of operations.

         In the  event  of a sale or other  disposition  by the  undersigned  of
Acquiror  Common Stock pursuant to Rule 145(d)(1),  the undersigned  will supply
Acquiror with evidence of compliance  with such Rule, in the form of a letter in
the form of Annex I  hereto.  The  undersigned  understands  that  Acquiror  may
instruct  its transfer  agent to withhold  the  transfer of any Acquiror  Common
Stock disposed of by the undersigned,  but that upon receipt of such evidence of
compliance the transfer  agent shall  effectuate the transfer of the Shares sold
as indicated in the letter.

         The undersigned  acknowledges and agrees that appropriate  legends will
be placed on certificates representing the Acquiror Common Stock received by the
undersigned  pursuant  to the  Merger  or held by a  transferee  thereof,  which
legends will be removed by delivery of substitute  certificates  upon receipt of
an  opinion in form and  substance  reasonably  satisfactory  to  Acquiror  from
independent counsel reasonably  satisfactory to Acquiror to the effect that such
legends  are no  longer  required  for the  purposes  of the  Act or the  fourth
paragraph of this letter.

         The  undersigned  acknowledges  that (i) the  undersigned has carefully
read this letter and  understands  the  requirements  hereof and the limitations
imposed  upon the  distribution,  sale,  transfer  or other  disposition  of the
Acquiror  Common  Stock and (ii) the  receipt by  Acquiror  of this letter is an
inducement and a condition to Acquiror's obligations to consummate the Merger.

                                               Very truly yours,

<PAGE>

                                                                    ANNEX I
                                                                    TO EXHIBIT A




                                                                    [Date]


[Name]


         On _____________  the undersigned sold  _____________  shares of common
stock, par value $.01 per share, of Tel-Save Holdings,  Inc.  ("Acquiror").  The
shares were received by the  undersigned in connection with the merger of Shared
Technologies  Fairchild  Inc. with and into a direct wholly owned  subsidiary of
Acquiror.

         Based upon the most recent  report or statement  filed by Acquiror with
the Securities and Exchange Commission,  the shares sold by the undersigned were
within  the  prescribed  limitations  set  forth  in  paragraph  (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the "Act").

         The  undersigned  hereby  represents  that  the  shares  were  sold  in
"brokers'  transactions"  within the  meaning  of Section  4(4) of the Act or in
transactions  directly with a "market  maker" as that term is defined in Section
3(a)(38) of the  Securities  Exchange Act of 1934, as amended.  The  undersigned
further  represents  that the  undersigned has not solicited or arranged for the
solicitation of orders to buy the shares,  and that the undersigned has not made
any  payment  in  connection  with the offer or sale of the shares to any person
other than to the broker who executed the order in respect of such sale.

                                                   Very truly yours,